Opinion

Utica production declines in 4Q 2016, but early 2017 recovery seems realistic


The latest published well production data from the Ohio Department of Natural Resources (ODNR) suggests that shale gas production in Ohio contracted by 180 MMcfd in 4Q 2016, with only 58 new wells turned in line. This represents a 54% YoY decline in activity compared to 4Q 2015, with rather flat development over the past year.

Among the top five Ohio Utica producers, only Chesapeake exhibited a significant negative trend, with production declining by 100 MMcfd in 4Q 2016. Meanwhile, Gulfport, Antero, Ascent, and Rice accounted for combined additions of 150 MMcfd. Gulfport showed the most impressive additional volumes, achieving 27% YoY growth. Among other players, XTO's gas output dropped from 234 MMcfd to nearly nothing, thus accounting for over 100% of Ohio's total production decline.

“It is conceivable, on the one hand, that XTO mistakenly reported daily production rates rather than total volumes. On the other hand, a sudden decline in early 4Q 2016 is consistent with the EIA-914 operator survey, implying that XTO could have shut in all wells early in the quarter” says Artem Abramov, VP Analysis at Rystad Energy.

Depressed 2016 completion activity notwithstanding, it is evident that current levels of activity are sufficient to maintain flat output in Ohio's Utica.

“Given the significant number of wells producing at restricted flows, as well as 150% growth in horizontal drilling activity from 1H 2016 to early 2017, we conclude that Utica is well positioned to begin restoring growth from Q1 2017, with production additions accelerating in 2H 2017” comments Abramov.



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