Halcon's test wells miss expectations
YOUNGSTOWN
Early test results from an underdeveloped portion of the Utica Shale play in Mercer and Venango counties in Western Pennsylvania did little to impress energy analysts when they were first released last week by Halcon Resources Corp.
The news comes less than one week after the broader market reacted in a lukewarm fashion to production results on the Ohio side, where the Ohio Department of Natural Resources released numbers that, for now, have quelled the widely held belief that the Utica is rich in wet gas and oil.
In a Utica operational update released last Thursday, Halcon reported its Phillips 1H well in Mercer County tested at a peak rate of 730 barrels of oil equivalent per day, while its Allam 1H well in Venango County tested at a peak rate of 1,652 barrels of oil equivalent per day.
Halcon announced in March that it would begin work on between 20 and 25 production wells across its 131,000 acres of leasehold in the Utica Shale this year. Thursday’s early test results were important, as the company has sought to explore its acreage in the northern portion of the play where little activity has occurred — and few test results have been released.
At the same time, a major land grab appears to be underway in Mercer County, where for months oil and gas companies have been buying up property at a steady pace.
From Trumbull County in Ohio to Mercer County in Pennsylvania, experts have bet on reservoir maps that show a window of rich oil and wet gas, which contains more energy and fetches a higher price on the market.
Gordon Douthat, a senior energy analyst with Wells Fargo Securities, wrote in a research note that the Allam results in Venango were roughly in line with Houston-based Halcon’s expectations for the Utica in terms of total production, but still less oily than expected. He added, though, that the Phillips well missed the mark in terms of returning promising amounts of oil and wet gas.
Halcon’s test largely resulted in dry gas, which was disappointing for some analysts, but others cautioned that the northern portions of the play are still under exploration.
Some are banking on further results expected in the coming weeks from Halcon’s other wells in close proximity to the Phillips and Allam wells.
The company should have additional results to report in the weeks ahead, said Chad Mabry, an analyst at the energy investment bank KLR Group. As part of its exploratory phase, Halcon has one well testing, three resting and one drilling.
Of particular interest to many analysts are the Brugler and Kibler wells in Trumbull County, where BP also is ramping up its activities, in the hopes of striking oil and wet gas. Analysts were somewhat concerned Tuesday that results in Mercer and Venango counties could provide limited insight into what’s ahead in Trumbull County.
“I don’t know if disappointing is the right term. It’s certainly less than what we’ve seen down in the southern area of the play,” said Will Green, an energy analyst with Stephens, an investment bank. “The results aren’t as prolific as some others we’ve seen in areas like Belmont and Guernsey, for example.”
Andrew Coleman, an analyst with the investment bank Raymond James, said Halcon’s wells in Venango and Mercer counties had shorter lateral runs and less frack stages, meaning results were never expected to be stellar in comparison with sites on the Ohio side of the play, where wells have been known to produce 1,500 to 3,000 barrels of oil equivalent or more per day with longer laterals and more stages.
“I’d really be hesitant to take results from a few test wells in Western Pennsylvania and extrapolate those to decide what will happen with other wells closer to the area in Ohio,” said John Krohn, a spokesman for the industry outreach group Energy InDepth.
Coleman agreed, saying the market would need far more information on other production sites in the region before drawing any conclusions on the northern part of the play.