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Region’s oil, gas boom slows down

PDC Energy, one of first companies to invest, is pulling out as production tumbles

By Peyton Neely

The Marietta Times

pneely@mariettatimes.com

One of the first oil and gas companies to come to Southeastern Ohio may be pulling out of the area but that doesn’t mean it’s the end of the oil and gas boom.

“Recent Ohio production trends are in line with what has occurred nationwide, particularly with regard to declines in oil production, as nationwide oil production actually fell slightly in 2016 compared to the prior year’s output level,” said Jackie Stewart, state director for Energy In Depth. “When you compare the first quarter of 2017 compared to the most recent quarter last year, Washington County has realized a 39 percent decrease quarter over quarter in oil production and a 20 percent decrease in quarter over quarter natural gas production.”

PDC Energy was one of the first companies to land in Washington County in 2012. According to its website, PDC had approximately 62,450 net acres in the Utica shale play in Southeast Ohio as of the end of 2016.

“It has been publicized that PDC Energy has their southeastern Ohio assets for sale. This was announced in April of 2017,” said Washington County Commissioner Rick Walters. “It is believed that they leased a large section of ground in Texas and plan to concentrate the oil and gas production in Texas at this time. I think this is a business decision on behalf of PDC.”

PDC media representatives did not return phone calls or emails made to them for two weeks prior to Friday. According to the PDC website, to focus corporate resources on PDC’s premier Wattenberg, Colo. and Delaware assets, the company announced in April that it will seek to monetize its Utica assets in 2017 and is not planning to drill in the Utica Shale in 2017.

“At this time it remains to be seen if this will affect the oil and gas play in Washington County. This October a sizable number of acres will be at the end of the five-year lease with PDC. It will be interesting to see what happens with those leases but until then, I’m not sure what will happen,” said Walters.

According to Stewart, Washington County is in the top 10 Utica Shale counties, coming in at number 10 with 22 permits. Monroe is number four with 331 permits and Noble is number five with 213 permits.

In the first quarter of 2017, there were eight horizontal shale wells in production in Washington County. Edgemarc Energy, PDC Energy and Protege Energy accounted for these eight wells. Those same eight wells were also in production in 2016.

Stewart also mentioned in the first quarter of 2017, there were 152 horizontal shale wells in production in Monroe County. Statoil, Eclipse Resources, Triad Hunter, XTO, Antero, CNX Gas, EdgeMarc and Gulfport account for these wells. In Noble County in the first quarter of 2017, there were 134 horizontal shale wells in production and CNX Gas, Antero, PDC Energy, Artex Oil and R E Gas accounted for these 134 wells.

“I am one of the landowners involved in the Mason North well located at Coal Run in Beverly and I am very pleased with how PDC Energy has controlled the well drilling and production phase while keeping the landowners informed,” said Walters. “The roads have been taken care of and kept clean while traffic has been a little heavier than normal. I believe that the production will continue and that it will increase as prices of oil and gas increase.”

Stewart said for most of 2016, the U.S. natural gas prices were at their lowest level since 1999, contributing to an output reduction of 2.3 billion cubic feet per day.

“The problem in Ohio is not the decline of natural gas production. The problem is in our takeaway capacity and end use,” she said. “Overall the market and geology determine where oil and natural gas development is economically viable. The past few years have been extremely difficult on operators, due to several factors such as the low commodity priced environment we have been in as well as the over-supply and lack of demand.”

Stewart also mentioned Ohio is in dire need of energy infrastructure, such as pipeline development and end use options.

“Ethane crackers and natural gas power plants in conjunction with pipeline development will help tremendously to encourage more drilling in Ohio,” said Stewart. “With that said, PDC Energy announced in April during their Analyst Day that they plan to sell their Utica assets. Recently, other Washington County operators were noted as planning to sell their assets as well.”

According to Oil and Gas Investor, Utica production and leasehold are on the market in a sale handled by Meagher Energy Advisors. The assets are being offered by EM Energy Ohio LLC, an affiliate of EdgeMarc Energy Holdings LLC and Blue Ridge Mountain Resources Inc. The sale comprises 39,007 consolidated net leasehold acres and 66 producing wells located in Washington County.

“Market conditions, commodity prices and geology will ultimately determine where operators continue drilling and frankly, until we have more pipeline infrastructure and end use, it’s tough to tell what will happen next in Ohio,” said Stewart. “However, we certainly have a lot to be optimistic about.”

To date there is more than $10 billion invested in natural gas power plants in various stages of development going on, which will create 6,700 jobs, according to Stewart.

“This is an example of how Utica Shale economic impact is happening here, but through the end use of gas produced at the well head,” she said, “It’s also important to keep in perspective that shale production is occurring in other states in the Appalachian Basin and across the country and Ohio is just one piece of the pie. Shale production occurring nationwide makes it critically important to start exporting oil and natural gas well.”

Monroe County Commissioner Mick Schumacher said he had an oil and gas meeting on Thursday where he met with others about the oil and gas production in this region.

“The biggest problem we have is that we lack the infrastructure to support the oil and gas industry,” he said. “A reason that production has to be cut back is that we have got to get our roads fixed because that’s part of the game with oil and gas. Our wells have pressure there and we could drill but it’s really affecting our roadways.”

In 2004 when the Ormet plant closed in Hannibal, thousands of jobs were lost and Schumacher said that without the oil and gas industry, all of those people who lost their jobs could have left the area.

“We would be a ghost town, to be completely honest,” he said. “I am encouraged by the oil and gas industry here and I know when the infrastructure is taken care of, that industry will remain in our area for a while.”

By the numbers

¯Washington County is 10th in the state in well production with 22 permits and eight horizontal shale wells in production.

¯Noble County is number five with 213 permits and 134 horizontal shale wells in production.

¯Monroe County is number four with 331 permits and 152 horizontal shale wells in production.

Source: Jackie Stewart, state director for Energy in Depth.

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