Low prices for natural gas and related liquids are forcing Chesapeake Energy Corp. to cut into Ohio operations.
The Oklahoma-based energy giant said Wednesday that it intends to scale back its Utica Shale drilling in the coming months as profits drop and production continues to climb.
Chesapeake will lower the number of drilling rigs in Ohio from five to two by the middle of the third quarter and will reduce the number of Ohio crews that hydraulically fracture, or frack, the rock from four to 2.5 for the rest of 2015, the company said in an earnings call with analysts and the media.
Similar cuts are being made elsewhere, with some of the biggest reductions coming in the Eagle Ford Shale in Texas.
The company needs to maintain two drilling rigs in order to hold on to its leased acreage in eastern Ohio.
Chesapeake, the No. 1 player in the Utica Shale and No. 2 producer of natural gas in the United States, said it is has been very pleased with recent natural gas results in Columbiana County.
Three wells recently completed there show significantly more potential than nine earlier-drilled wells, spokesman Chris Doyle said.
The company is seeing a 50 percent improvement in production with the new wells, he said, and the company could expand its core area beyond neighboring Carroll County into Columbiana County.
Chesapeake is continuing to expand its laterals in Ohio to produce better results, officials said.
The company in 2012 averaged 4,900 feet per lateral. That grew to 5,150 feet in 2013 and to 6,200 feet in 2014.
Laterals likely will average about 7,900 feet with 41 frack stages in 2015, about 27 percent longer than the previous year, officials said.
Longer laterals with additional fracking pay out far more than shorter laterals, the company said.
Extending Ohio laterals will cost Chesapeake more, however. It anticipates spending $8.2 million per well in 2015, up from $6.7 million in 2013 and $7.2 million in 2014.
Chesapeake began production on 38 Utica wells in the first quarter. The average peak production of those wells was 1,272 barrels of oil equivalents per day.
Net production in the Utica Shale in the first quarter averaged about 110 thousand barrels of oil equivalents per day, an increase of 10 percent from the previous quarter, the company said.
Chief Executive Officer Doug Lawler reported that despite commodity low prices, Chesapeake’s overall production grew by 14 percent in the first quarter compared to first-quarter 2014.
This article was written by BOB DOWNING from The Akron Beacon Journal and was legally licensed through the NewsCred publisher network.