YOUNGSTOWN, Ohio – The CEO of Houston-based Encino Energy said oil prospects in eastern Ohio’s Utica shale could extend well beyond its current geographical window, setting the stage for exploration for years to come.
“We think it’s likely the oil window stretches beyond the current limits of economic production,” Hardy Murchison said in an interview with The Business Journal. “It could be years or even a decade before we know the full extent of the play.”
Encino, through its subsidiary EAP Ohio, has raised eyebrows over the past two years as oil production from its wells across the Utica/Point Pleasant formation has soared. Today, the company is the largest single oil producer in the state and accounts for nearly half of all the oil produced in Ohio.
The company has transformed the Utica – generally considered a formation that holds a vast repository of natural gas – into a major oil play. Areas such as Columbiana County, for example, which until 2023 produced a negligible amount of oil, is today pumping amounts that were unthinkable just a year earlier.
“We knew the gas play was highly economic, and we knew we could make that work,” Murchison said. “We had strong expectations that the oil play would also work economically.”
Encino acquired the bulk of Chesapeake Energy Corp.’s leasehold assets in eastern Ohio in 2018. In 2009, Chesapeake, then under the direction of CEO and Chairman Aubrey McClendon, became the first energy company to explore the Utica in earnest in eastern Ohio, securing lease agreements from counties stretching from the southeast portion of the state through Columbiana County to the north.
At that time, much of the technology and knowledge of the Utica had yet to be developed, and the geological composition of the shale formation was still much of a mystery.
Technology, Expertise, Growth
All of this changed after Encino’s acquisition, said Murchison, who credits advanced drilling technology and the right team of experts and analysts as major factors in opening the oil window.
“I think the combination of technology and the people that we’ve applied to it have made the oil play more competitive on a bigger scale than we anticipated,” he said.
Advances in 3D seismic imaging, for example, have allowed analysts to view the Utica formation more clearly, Murchison added. This, coupled with improvements in rotary steering technology, has helped operators steer horizontal well bores with more precision than ever, targeting areas of the formation up to 4 miles or longer.
Perhaps the most important technological development is the application of computing power to assemble and handle an immense quantity of data, Murchison added. “That’s where the team is important,” he emphasized. “We invested in a first-class team from every resource play in the country and brought the best technologies to bear.”
As a result, Encino has led the charge in redefining the Utica’s potential, Murchison said. “We were able to unlock the oil play years ahead of anybody else, even though it had been sitting there latent for a decade.”
To date, Encino owns 1.2 million net leasehold acres in the Utica and continues to approach property owners with new land contracts, Murchison said. The CEO said Encino has grown its leaseholds by approximately 10% over the past several years, mostly in areas that have demonstrated solid production results.
“There’s room to expand in the play – north, west and south,” he said. “The geology looks attractive well beyond the limits of gathering infrastructure.”
Production Soars
During the third quarter of 2024, Encino’s 1,046 wells in the Utica produced a total of 4.228 million barrels of oil, or 46.3% of the oil produced in the entire state, according to the most recent data from the Ohio Department of Natural Resources. Through the first nine months of 2024, the company pumped out more than 11.8 million barrels, or 48.5% of the state’s entire output.
“We’ve been active on all fronts,” Murchison said. “We’ve acquired more acreage; we’re the most active driller with about 1,000 producing wells; we have four rigs operating, and we’re the largest oil producer in the state,” he said.
In Columbiana County, oil production hit record levels for the first nine months of 2024, ODNR data show. As of Sept. 30, the county produced a total of 1.220 million barrels of oil, easily surpassing production throughout the entire year of 2023, which stood at 970,936 barrels.
All the oil-producing wells in Columbiana County are owned by Encino, records show. During the third quarter, these wells yielded 404,538 barrels, the largest of which was the Grove CL KNX well in Knox Township, which produced 61,854 barrels over a 92-day period, according to ODNR.
Other areas of the Utica have proven even more productive, records show. The largest oil well in the state during the third quarter – Encino’s Stocker well in Harrison County – produced 135,013 barrels.
Still a Gas Giant
Murchison added that despite the recent attention given to oil finds, Encino’s natural gas output from the Utica remains equally strong. “We’re still producing 900 million cubic feet a day of gas,” he said.
During the third quarter, Encino wells yielded 84.7 billion cubic feet of natural gas across the Utica, ODNR data show. In Columbiana County, Encino’s 85 wells produced 9.656 billion cubic feet of gas, records show.
In all, the 185 Columbiana County wells, including Encino’s and others owned by operators such as Hilcorp Energy Co., Pin Oak Energy and Geopetro LLC, together produced 21.069 billion cubic feet of gas during the third quarter.
The single largest producing gas well in Columbiana County was the Grove CL KNX in Knox Township, yielding 442.878 million cubic feet of gas during the third quarter.
Ohio’s 3,494 horizontal wells produced 525.3 billion cubic feet of gas during the third quarter, data show.
Challenges Ahead
Ironically, Encino’s success in the Utica has also presented additional challenges – challenges that can nevertheless be managed, Murchison added.
“The challenges come down to infrastructure and local markets,” the CEO said.
Encino’s production has outpaced the state and country’s oil and gas infrastructure build out, which consists of pipelines, processors and other midstream projects that are necessary to move oil and gas from one place to another.
“We’re working hard with the midstream companies and customers to expand capacity to handle oil volumes,” Murchison said. “That’s a very manageable set of projects. It’s a challenge, but it’s something we’re doing very effectively.”
The larger obstacle is the lack of pipeline capacity to transport oil and gas across state lines to other markets, Murchison said. “That’s a federal issue that the new administration may address,” he noted, as well as permit reform.
Moreover, building more local demand is critical to expanding the Utica play, Murchison said. Among the major users of energy, for example, are efficient, natural gas-fueled power generation plants. “If we could see more power generation fired by natural gas built in Ohio, it promises to provide a better market for our product and a huge economic boost to the state.”
Such efforts could lower the cost of utilities, making it more inviting for manufacturers to locate to the state, he said. “It would be a huge competitive advantage for Ohio,” he added.
Still, Murchison said Ohio provides a welcoming regulatory environment for the industry, as Encino settles in for the long haul.
“We focus on long-term sustainability,” Murchison said, emphasizing Encino’s commitment to the state. “We’ve approached things from an environmental perspective, a safety perspective, and a community perspective with the view that we want to do this for decades.”
Pictured at top: An Encino well pad in Salineville, Columbiana County.