Napalm Creek

Oil, gas lease filing more than quadruples in 2011

CantonRep.com staff report
Posted Jan 09, 2012 @ 07:00 AM
 
CANTON —

Companies seeking the potential of the Utica shale drilled only one well in Stark County during 2011, but they lined up thousands of acres for future development.

Employees of Stark County Recorder Rick Campbell filed 4,563 oil and gas leases during 2011, more than four times the number processed during 2010.

“We’ve never been this busy before,” Campbell said of the leases filed last year.

Even with the increased filings during 2010, the surge in new leases filed during 2011 was surprising, he said. “We’re keeping up, but it’s a lot of work.”

Chesapeake Exploration — a subsidiary of Oklahoma City-based Chesapeake Energy — led the pack with 3,771 leases filed. That’s a jump compared to 2010 when Chesapeake and business partner Ohio Buckeye filed 653 leases. (Ohio Buckeye filed 40 leases in 2011.)

Chesapeake’s filings in 2011 — including 1,046 leases filed Dec. 5 — accounted for nearly 83 percent of leases filed. Chesapeake has a stake in 78 percent of the oil and gas leases filed in Stark County since the Utica shale boom began.

Interestingly, the firm that finished a distant second to Chesapeake, with 246 lease filings during 2011, hasn’t gotten involved in Utica shale drilling. Ohio Valley Land & Exploration, based in Youngstown, drills conventional wells in northeast Ohio.

NEW OIL BOOM

Oil and gas leases give companies permission to access underground natural resources. Most deals give landowners a one-time signing bonus and a percentage of royalties. When the shale boom began during 2010, landowners were averaging between $1,000 and $1,500 per acre, but that price since has topped $5,000 per acre in some areas.

Companies are using horizontal drilling to reach and penetrate shale rock formations, and hydraulic fracturing to break the rock and release oil and gas. But hydraulic fracturing has been controversial because it requires forcing up to 5 million gallons of water, sand and chemicals into the well.

Chesapeake has been working more than two years to develop the Utica shale formation in eastern Ohio. Reports are the company has invested $2 billion to lease more than 1.5 million acres.

The company is confident oil and natural gas liquids will be found in the Utica formation, which is a band of rock up to 300 feet thick and about 6,000 feet below the surface. Natural gas liquids — also called wet gas — are considered valuable because they contain butane, propane and ethane.

PLENTY OF PARTNERS

During 2010 Chesapeake teamed with EnerVest, a Houston-based company with offices north of Hartville, in a joint venture to develop Utica shale holdings in Ohio. EnerVest got into the Ohio oil fields before the shale boom when it bought the holdings of Range Resources and Belden & Blake.

In addition to working with EnerVest, Chesapeake has teamed with Total S.A., a French company. Total will spend $2.32 billion — with $2.03 billion going to Chesapeake and $290 million to EnerVest — for a 25-percent stake in Chesapeake’s holdings in 10 Ohio counties, including Stark.

When Chesapeake announced it had reached and agreement with Total, Aubrey K. McClendon, chief executive officer, called the Utica shale “a world-class asset with world-class returns.” Chesapeake has said it might drill up to 12,000 wells in Ohio and it has projected returns of $20 billion.

LEADING DRILLER

Through the end of December, Ohio’s Department of Natural Resources had registered 159 Utica shale drilling permits, and Chesapeake had its name on 111 of the permits.

So far, the company has drilled a well in Osnaburg Township and started work at sites in Washington and Bethlehem townships. The company opened offices in Canton last summer.

Chesapeake has 41 permits for wells in Carroll County. Last year, it touted production from a Carroll well as a sign of future success.

Keith Fuller, director for corporate development, said the Utica shale is part of Chesapeake’s efforts nationwide to increase oil and wet gas production.

“The oil and natural gas liquids produced in this area have an advantage in the market over dry natural gas due to higher prices,” Fuller said.

Chesapeake is pursuing more leases in Ohio. In November, McClendon told investors the company believes more oil will be found in the Utica shale’s western end. The projected break between oil and wet gas discoveries splits Stark County.

MORE TO COME?

Other large U.S. oil and gas companies — Anadarko Petroleum, Devon Energy Corp. and CNX Gas among them — also have targeted the Utica shale for development, according to ODNR permit records.

County recorder officers around the state have seen oil and gas lease filings increase, Stark County’s Campbell said. Offices in smaller counties have been bombarded, he said, and forced to create space for oil industry employees who are scouring lease records.

Over the past 10 years, Campbell has increased use of computers in the Stark Recorder’s office. Information is easier to access. and it can be done from other states. Down the road. he plans more advancements, including setting up a PayPal account to allow for online payments of filing fees.

Campbell said there are days when 10 to 15 people from oil companies visit the office to review records. “I guess it’s nice that we don’t have 100,” he said.

 

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