Over the past few weeks, the buzz around the Marcellus Shale has actually been about its deeper neighbor, the Utica, where a handful of companies have drilled record-setting wells for record-high costs.
That has been making some people very nervous — not because the dry portion of the Utica underlying southwestern Pennsylvania, eastern Ohio and the West Virginia Panhandle might be too expensive to drill. Instead, it’s because, as some companies predict, it might soon be the least expensive.
“If there’s a shoe to drop that makes things worse, it’s the dry Utica working,” said Jim Crockard, CEO of the newly-formed Marcellus startup Lola Energy Operating Co.
Mr. Crockard founded Lola this summer with a handful of other former EQT Corp. executives looking to capitalize on good prospects left behind by operators that have had to cut back or vanish because of stubbornly low commodity prices. It’s a been tough market for everyone in the exploration and production business, from startups like Lola to megagiants like Royal Dutch Shell.
The glut of natural gas produced from shale wells over the past five years has inundated the market. Each new shale play seemed to outshine the last, with bigger wells and better economics. The price of natural gas futures at the national benchmark, Henry Hub, dipped below $3 per million British thermal units in January and has stayed there, inching closer to $2 in the past few months.
Now, here comes the Utica, another giant gas field.
The so-called dry portion of the Utica contains methane, the fuel used for heating and cooking. “Wet” portions contain methane as well as other natural gas liquids, including ethane and propane.
“If it does work, if you start flooding the market with economic Utica wells,” Mr. Crockard said, the benchmark price of gas will stay at $2 per million British thermal units.
More to the point: “It will wipe out all the economic Marcellus wells.”Read more by clicking right here.
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