<\/p>\n
However, natural gas prices have tumbled since July 2008 when natural gas was selling for $10.79 per thousand cubic foot (\u201cmcf\u201d) at the wellhead.<\/a>\u00a0 As of October 2012, that price fell to $3.03 per mcf. Yes, that is a 72% decline.\u00a0 So, what is a gas baron to do?\u00a0 Go West.\u00a0 While most producers of natural gas have enjoyed the fruits of southwestern Pennsylvania, some others are testing their luck a little farther west into the Buckeye State.\u00a0 But why?<\/p>\n To answer that question, one must understand the bigger picture of natural gas development.\u00a0 The residential customer who heats her home all winter long is only one facet of energy consumption in the United States.\u00a0 The natural gas that heats your home\u2014methane\u2014is only one type of gas that flows from the bosom of the Mighty Marcellus.\u00a0 In the southwestern extents of Pennsylvania, the gas flows \u201cwet.\u201d\u00a0 This means that when the gas comes out of the ground it contains other \u201chydrocarbons\u201d besides methane such as butane, propane, ethane, and pentane.\u00a0 Smokers will appreciate butane squirting out of the Earth and grillers go for their spatulas at the sound of \u201cpropane.\u201d\u00a0 There is a catch, however.\u00a0 To harvest these very valuable natural gas liquids (\u201cNGL\u2019s\u201d), a producer must have infrastructure in-place to separate the flowing gas into its respective constituents.\u00a0 And, you guessed it: that costs big bucks.\u00a0 But, to the victor go the spoils.\u00a0 It makes sense right?\u00a0 One hole, multiple markets.<\/p>\n This is where Simba enters stage-right.\u00a0 While the Mighty Mustafa Marcellus charges on in Pennsylvania, Ohioans are gearing-up and pulling out their ink pens to sign leases as oil and gas producers move into the oil and liquid-rich Utica Shale.\u00a0 You tick a what?\u00a0 Another shale? A government conspiracy must be afoot, right?\u00a0 Wrong.\u00a0 Any such conspiracy would have to stem from the collision of tectonic plates approximately 450 million years ago\u201460 million years before the formation of the Marcellus Shale.<\/a>\u00a0 It was at that time that the Utica Shale took its shape.<\/p>\n At 14,000 feet at its deepest, the Utica Shale is quickly being added to oil and gas service companies\u2019 taglines as they try to keep pace with the always forward-looking oil and gas producers.\u00a0 Where Washington County was the epicenter of Marcellus development, Carroll County is the corollary in eastern Ohio, constituting 36% of permits as of January 19, 2013 according to the Ohio Department of Natural Resources<\/a> \u00a0(click here<\/a>\u00a0to see a map of permitted and drilled wells in Ohio).<\/p>\n As you look around eastern Ohio take note of Belmont County.\u00a0 While it may only account for 3% of permitting in Ohio, it is home to the mother of northeastern gas wells: the Shugert 1-12H.\u00a0 The Columbus Dispatch<\/i> reported on December 3, 2012<\/a> that production data from this well indicated that it had initial production rates of 28 mmcf\/d and<\/i> (potentially more impressively) 2,900 barrels of liquids per day.\u00a0 The Shugert well appears to produce three times the gas and two times as much liquids as the prior champion, the Buell well, in Harrison County, Ohio.\u00a0 The Buell well, operated by Chesapeake Energy (NYSE: CHK), was the first big Utica well that started to draw others into the play.\u00a0 If the Buell well was not successful in attracting attention, Gulfport Energy\u2019s Shugert well did the trick.\u00a0 In fact Gulfport (NASDAQ: GPOR) picked up another 30,000 acres\u2014an estimated $300 million acquisition<\/a>\u2014by December 18, 2012 according to Marcellus Drilling News (www.marcellusdrilling.com<\/a>), bringing its net acre holdings to 99,000 in Ohio.<\/p>\n <\/p>\n Source: geology.com<\/i><\/p>\n This diagram illustrates the relative depths of the Marcellus & Utica shales as you cross from Ohio into Pennsylvania. \u00a0This should make it clear why Utica development is more prevalent in Ohio and not as much in Pennsylvania, and why the opposite is true for Marcellus development.<\/p>\n According to the Dispatch<\/i>\u2019s December 13th article, 114 wells are drilled but many are not producing.\u00a0 Why?\u00a0 Recall, the earlier discussion about the necessity of processing with liquids-rich shale plays.\u00a0 Because Ohio is in its infancy stages, its processing facilities and gathering lines (known as \u201cmidstream operations\u201d) are not yet fully operative. However, here is an interesting \u201cconnection\u201d between the Renz well in Washington County, Pennsylvania and the Shugert well in Belmont County, Ohio: both wells produce gas and liquids processed by MarkWest Energy Partners (NYSE: MWE).\u00a0 See, it is a small world after all.<\/p>\n What does this all mean for us commoners?\u00a0 That is hard to say exactly.\u00a0 In the near term home-heating prices in the Northeast remain low, a smoker can get her lighter filled on the cheap, and the Superbowl tailgators will enjoy less-expensive propane for their grills.\u00a0 Long-term prospects include compressed natural gas (\u201cCNG\u201d) fueled vehicles and natural gas-fired power plants.\u00a0 Keep in mind, the EIA reported on January 28, 2013<\/a> that United States citizens in all sectors consumed nearly 20 trillion<\/i> cubic feet of natural gas in the first ten months of 2012 and slightly more than 24 trillion cubic feet in all of 2011.\u00a0 So, yeah, we need gas.\u00a0 According to fractracker.org, horizontal well production in the Marcellus declines 39% over the first year of production<\/a>.\u00a0 Thus, companies will continue to hunt new sources of natural gas to meet growing demand but in the face of declining wellhead prices.\u00a0 Perhaps Rafiki Resources, will help keep the fledgling Utica shale viable until midstream operations become full functional in the next year or so.<\/p>\n","protected":false},"excerpt":{"rendered":" In 2004 the U.S. energy profile changed drastically as Range Resources, Inc. (NYSE: RRC) reported positive results from its recently drilled Renz well.\u00a0 This well would soon become the epicenter of development of the Marcellus Shale and the godfather of oil and gas development in Ohio. Now a roaring household [\u2026] <\/p>\n![\"Screen](\"https:\/\/i0.wp.com\/www.duqlawblogs.org\/joule\/wp-content\/uploads\/2013\/05\/Screen-Shot-2013-05-30-at-1.57.44-PM-284x300.png?resize=284%2C300\")
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