Gulfport’s Science Pays Off Big in Utica Shale
YOUNGSTOWN, Ohio -- The CEO of Gulfport Energy Corp., Jim Palm, and a team of company geologists, engineers and scientists had a hunch – a calculated hunch.
Using data and a series of maps that showed the various depths, levels of organic carbon content, and thickness of the Utica shale in eastern Ohio, the team succeeded in creating a single composite through an overlay mapping technique they hoped would identify the most likely location to drill for natural-gas liquids.
The result was a bull’s-eye that ringed Harrison and Belmont counties in the southeastern part of the state, spurring the company to acquire what today amounts to more than 125,000 acres – 64,000 of which lie in the targeted region.
“When you overlay these maps, we came up with this sweet spot,” Palm told an audience at Hart Energy’s Developing Unconventional Gas, or DUG, conference in Pittsburgh Nov. 14. “That’s where we started buying acreage in 2011.”
Oklahoma City-based Gulfport was not the first in the Utica – its footprint is relatively small when compared to other energy companies that have amassed huge tracts of land there – but to date it has developed and completed the most productive wells in the play.
“I think we did a lot of science,” Palm tells The Business Journal. “It’s helped us figure out how we could go frack the wells.”
It didn’t take long for Gulfport’s hunch to prove correct. In late August, the company released the results from its first completed well – the Wagner 1-28H well in Harrison County. That well registered an impressive peak rate of 4,650 barrels of oil equivalent per day, outdistancing what had earlier been the most productive well in the Utica, Chesapeake Energy’s Buell well in Harrison County.
“That was a great start,” Palm says. “I guess our guys did the right thing, because we’ve had some real nice completions.”
Less than a month later, Gulfport announced its Shugert 1-1H well in Belmont County hit a peak rate of 4,913 barrels of oil equivalent per day, a higher production rate than the Wagner well. And, most recently, the company said its B.K. Stephens well in Harrison County produced at a peak rate of 3,007 barrels of oil equivalent per day. Gulfport has drilled six wells thus far in the Utica and plans to spend another $225 million next year to drill 50 more wells in the region.
The real bonanza was yet to come. On Nov. 26, Gulfport announced the results of the most productive well drilled in the Utica – the Shugert 1-12H well, drilled next to the Shugert 1-1H.
The new Shugert well registered 28.5 million cubic feet of natural gas per day and yielded 300 barrels of oil and 2,907 barrels of natural gas liquids per day, the company reported.
When averaged, the Shugert 1-12H boasts 7,482 barrels of oil equivalent per day, by far the best performance of any well in the state.
While much of Gulfport’s success in the Utica is attributed to pre-drilling science, Palm doesn’t discount a bit of luck in stumbling onto what appears to be the “core of the core” in the play.
The initial data didn’t show precisely how much pressure existed in this section of the Utica, a rock formation 8,000 feet below the surface, Palm says. To the CEO’s surprise, the Wagner well not only delivered high production results, it also showed that this part of the Utica was under intense pressure – “overpressure” in fact.
“It’s been a pleasant surprise,” Palm says. Overpressure inside the rock formation allows for greater permeability, thereby making it easier to extract hydrocarbons of oil and gas. The more pressure, the better the well, he explains.
“Overpressure – that’s been the real keys to it,” Palm adds. “It’s extra-special that we’ve got that pressure preserved to help get the oil out of the rocks.”
Kent A. Bowker, president of Bowker Petroleum LLC, The Woodlands, Texas, said at the conference the Utica is laced with rich limestone deposits that increase the permeability of the shale.
“Scores of thin limestone layers may act as permeable superhighways,” Bowker observes. “The permeability is why we’re seeing such high flow rates. The reservoir boundaries vary across the play and that’s going to be the key to finding the sweet spots.”
Gulfport also examined these data and determined that the company should experiment with slightly different completion techniques when it came to hydraulically fracturing their Utica wells, Palm says.
Gulfport’s Wagner and Ryser wells in Harrison County, for example, boast the longest horizontal laterals in the state, he notes. Energy companies use horizontal drilling to explore for shale gas – a method where pipe is dropped vertically into a well and then turned horizontally to drill through thousands of feet of relatively thin layers of shale rock.
On average, horizontal drill laterals have extended between 5,000 and 6,000 feet in the Utica. The Ryser well measures 8,291 feet in length while the Wagner horizontal leg extends 8,143 feet. “We like to go as far as we can,” Palm says.
Then, the well is stimulated through hydraulic fracturing, a process that injects water, sand and a small quantity of chemicals into the shale at high pressure to create fissures in the rock and free the oil and gas.
Hydraulic fracturing is usually performed in 300-foot stages along the horizontal leg. But Palm says that Gulfport has enjoyed more success by drilling both longer laterals and fracturing the well in shorter stages – in some cases intervals of just 225 feet.
“We’ve done shorter frack lengths,” Palm reports. “We’ve done up to 28 stages [in a well], whereas other companies might use half or three-quarters that many.”
Another technique Palm says is critical to developing a productive well is providing for a shut-in, or “resting,” period between fracturing and peak testing.
“We do a test-and-rest,” Palm says. After the last stage of a well is fracked, a modest test is conducted and the well is shut down 30 to 60 days. Then the well is retested, usually yielding much improved results. “There’s definitely an improvement when you shut in those wells for a while,” he says. “I have a feeling that 30 days is good enough in most places.”
The latest results from the Utica have persuaded Palm that the play is akin to his company’s most profitable operations in the Permian Basin in southern Louisiana. “We’re real proud of our south Louisiana acreage, which throws off a tremendous amount of cash flow,” he says. “This may turn out to be better than the south Louisiana stuff that we’ve got.”
During a conference call earlier in November, Palm declared that the Utica is “a once-in-a-lifetime play,” and a “company changer. We will be a Utica-focused company.”
Gulfport’s chief financial officer, Michael Moore, said that the robust production results of Gulfport’s initial wells point to a much more lucrative position than first thought.
“Everything we’ve seen so far makes our original estimates appear very conservative,” he said.
Still, if there’s one impediment in the Utica, it’s the lack of pipeline infrastructure place, Palm says. Gulfport has signed an agreement with Denver-based MarkWest Energy Partners for that company to transport and process natural gas liquids from Gulfport wells in the region. MarkWest is constructing a $500 million processing plant in Cadiz, in Harrison County.
The first phase of that project should be operational by next quarter. “At that point,” he says, “we should be able to hook up all the wells we’ve got drilled by that time.”
And, Palm says, with every well drilled, more information about the Utica and how to develop the play surfaces.
“Based on what we’ve seen, we feel very comfortable,” the CEO says. “We’re still learning, and we’re doing our best to science it out every day. It’s been quite a ride.”
This story appeared in the MidDecember edition of The Business Journal.
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