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Why investors should pay attention to the Utica Shale oil play

Part 6
Why investors should pay attention to the Utica Shale oil play (Part 6 of 7)

2Q13 earnings calls were positive for Utica Shale (Continued)

Positive sentiment about the Utica Shale (continued)

The 2Q13 earnings calls of the major players in the Utica Shale reflect positive sentiment toward the play.

2013.08.24 - Utica ShaleEnlarge Graph

Midstream in the Utica Shale was a bottleneck… but it’s improving

Chesapeake Energy

  • “We do have a number of projects coming online in the next 12 months that will help significantly in the Utica, I guess to begin with. We’ve got 200 million in processing coming on now, another 200 million towards the end of the year there, and capacity for another 200 million in probably second quarter of ’14. So lots of ramp up room there in the Utica.”
  • Note: “200 million in processing” refers to 200 million cubic feet per day of natural gas processing.
  • “As far as ethane, the Apex Pipeline is scheduled to come online around the beginning of 2014, and that’s a significant assistance to us in moving ethane out of the basin. We’re an anchor shipper in that line, and we think that’s a good advantage to us.”
  • Note: CHK is referring to a major pipeline coming online to take away hydrocarbons from the Utica area. Without infrastructure to take away the hydrocarbons, companies can’t get their production to market.
  • “Well, in terms of the NGL production, we have the Kensington plant that just started in the Utica. We have additional plant coming online later this year. So that ramp is significantly driven by that infrastructure in the Utica, as well as in and some other plays as well. And so that’s really the driver there.”
  • Note: “The Kensington plant” refers to a new gas processing plant that was necessary infrastructure in order for producers in the Utica Shale to be able to process and sell their natural gas and natural gas liquids production.

CONSOL Energy

  • “But suffice to say, when you look at the drill plans on Utica for ’13 and for ’14, we feel that on the midstream side and on the other logistical challenges, not just flowing the gas on the midstream, but also things like water for completions and things like that, with that plan in place, that should address the drilling program that has driven the production guidance that we provided. So we think we’ve got the bottlenecks identified for midstream such as other things like I said like water, and that all got reflected and rolled into the overall production guidance that we provided for the company.”

EV Energy Partners

  • “Production from the joint venture area and across the whole play is now starting to grow its midstream bottlenecks are being eliminated. In May, Dominion’s Natrium plant finally began processed in 200 million cubic feet of wet gas. Mostly of which is produced by the Chesapeake joint venture. This was the first step in allowing a significant increase in Utica production.”

Ethane rejection mode

Chesapeake Energy

  • “We’re able to do some blending with our ethane in the Utica. What we’ve modeled in the way of rejection is rejection for July and August. Beyond that, we have not modeled any rejection, but as you know, it’s possible. We’ve had some rejections this year as well. So hard to predict. The pricing has been right around breakeven on a lot of our contracts for several months now, one month ahead, one month below. And we monitor that very closely, and make the most economic decision each month.”
  • Note: “Ethane rejection” refers to the decision to leave ethane, which is a natural gas liquid, in the natural gas stream instead of removing it and selling it. This decision is determined by the relative price of ethane and natural gas. Lately, ethane has been so cheap that ethane rejection has become more common.

Acreage values

EV Energy Partners

  • “Turning now to the wet gas window, EVEP owns about 54,000 acres and what is currently defined as wet gas window. We are pleased to announce our first sale of wet gas Utica acreage, along with other EnerVest institutional partnerships, EVEP has reached an agreement to sell acreage in Guernsey, Harrison and Guernsey and Noble counties were slightly under $12,900 per acre, with prices ranging from a 11,000 to 15,000 per acre. Most of the acreage was sold for $13,000 per acre.”

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