CLEVELAND – In his drive to open Ohio up to Chesapeake Energy and other hydraulic fracturing drillers, Governor John Kasich has spotlighted one Utica shale well in Harrison County, “Buell 8H.” As recently as April 2, for example, the Columbus Dispatch reported –
“Kasich administration officials are pointing to the Buell well as an indicator of just how lucrative Utica shale drilling can be . . . . Rick Simmers, chief of Oil and Gas Resources Management for the Department of Natural Resources, said the Buell well’s output was about 300 times greater than the average daily output of the 49,000 traditional gas-producing wells in Ohio.”
Last week, however, Chesapeake Energy announced the latest figures from Buell 8H:
“The company’s best Utica well, the Buell 8H in Harrison County, OH had an initial peak rate of more than 3,000 boe [barrel of oil equivalent] per day in September 2011, with roughly half the production from liquids. The Buell well is currently producing at a rate of 1,040 boe per day . . . .”
This sharp decline in production is typical for shale wells, but is usually kept quiet by drillers and their political allies. If the public knew about it, it might cool the gold rush fever the drillers are attempting to create. Chesapeake and other companies first acquire large amounts of land at low prices, then promote the idea of a coming shale boom. Land prices rise quickly, and they can sell the land at a big profit. Chesapeake’s business is more in land speculation than in energy production.
After Chesapeake Energy’s first quarter results filing, Barron’s reported –
“Perhaps most importantly, Chesapeake reported disappointing results for liquids production. The company has been touting its shift from natural gas to liquids production as a way to overcome low natural gas prices. But production of liquids was unimpressive.
As Sterne Agee analyst Tim Rezvan wrote: ‘Liquids volumes of 114 mb/d were well below our estimate of 122 mb/d. Despite the well-publicized announcements of production curtailment, it appears the company has choked back far less production than indicated. And while production guidance has skewed gassier to account for projected asset sales (see below), we believe this quarter’s skew suggests that prior liquids production growth guidance was likely unattainable.’”
— Paul Ryder, Assistant Director, Ohio Citizen Action