Hilcorp Expands Exploration in Lawrence County, Pa.

YOUNGSTOWN, Ohio – Oil and gas production in western Pennsylvania, especially Lawrence County, is moving forward at a measured pace as Houston-based Hilcorp Energy Co. gradually expands its interests in the northern tier of the Utica shale.

Hilcorp has emerged as the dominant active prospector for oil and gas in the northern tier, which encompasses Columbiana, Mahoning and Trumbull counties in Ohio and Lawrence and Mercer counties in western Pennsylvania.

“Right now, we’ve been seeing most of the action in the northwest section of the county,” says Lawrence County Commissioner Dan Vogler. “A lot of it seems to be in Pulaski and North Beaver townships.”

Rigs have cropped up from time to time across the county over the course of the year, Vogler says. “We’ve also seen a good deal of these wells being capped,” he says, as they await hookups to pipelines.

In Pennsylvania, the onslaught of oilmen and energy companies started more than five years ago in the northern central region of the state. These companies hustled to stake out positions to drill in the Marcellus shale, a rock formation that emerged as one of the largest natural gas repositories in the world.

In the western part of the state, the Marcellus formation pinches out and moves closer to the surface of the earth and is therefore less productive. The Utica and Point Pleasant formations, however, lie beneath the Marcellus and have been subject to greater geological pressure, which helps push hydrocarbons to the surface.

“When this hit Pennsylvania five years ago, it was almost like an overnight abundance of activity in the northern central region,” Vogler says. “Here, it’s been very slow, but steady, growth.”

Thus, Lawrence County didn’t witness the same “boom and bust” effect that, for example, Tioga County experienced when oil prices started their slide late last year. “It hasn’t had the significance of an impact as it would if it came on like gangbusters,” the county commissioner says.

Still, Lawrence County is among the more lucrative regions in the northern tier of the Utica for natural gas, just behind Columbiana County in Ohio in terms of production.

Horizontal wells in Lawrence County collectively produced 8.023 billion cubic feet of natural gas during the three months ended Sept. 30, reports the Pennsylvania Department of Environmental Protection. At Sept. 30, Lawrence County reported 47 wells in production.

These production numbers exceed Columbiana County’s 59 producing wells, which yielded 6.787 billion cubic feet of natural gas during the third quarter, according to the most recent data released by the Ohio Department of Natural Resources.

These numbers don’t come close to some of the producing wells in the Utica’s southern tier, according to ODNR. During the third quarter of 2015, a single well drilled by Rice Energy in Noble County yielded 1.812 billion cubic feet of natural gas over a 92-day period.

The most productive well in Lawrence County during the third quarter is Hilcorp’s Mijavec 2H well in Pulaski Township, according to DEP records. That well produced 304.4 million cubic feet of natural gas. Two other wells in the same unit, the Mijavec 3H and 4H wells, yielded 299.3 million cubic feet and 260.2 million cubic feet respectively during the period.

While natural gas production is steady in Lawrence County – the amount of oil yielded from wells in the northern tier of the Utica remains negligible – wells in Mercer County directly to the north aren’t nearly as productive, data show. During the third quarter, Mercer County reported 18 wells in production that yielded 1.882 billion cubic feet.

This year, Hilcorp secured 12 new horizontal well permits for Mercer County. Two other permits issued this year were renewals of permits first awarded to Royal Dutch Shell affiliate SWEPI.

The company operates two well pads in Poland Township in Mahoning County in Ohio at the Carbon Limestone Landfill site. Seven of those wells are in production, and during the third quarter the company’s best well at the site yielded 209 million cubic feet of gas.

Hilcorp spokesman Justin Furnace declined comment on its activity in the northern tier of the play.

Since 2012, Hilcorp has drilled 101 wells in Pennsylvania, most of them in Lawrence County, according to DEP data. The agency has awarded 39 permits this year for wells in the county, and all but four are Hilcorp’s. Rex Energy Corp., based in State College, Pa., secured the four other permits.

Pulaski Township landed the most permits – 15 – this year, according to DEP records, while North Beaver Township secured 13 new permits for wells there.

However, the entire county benefits from oil and gas activity throughout the state because of an impact fee former Gov. Tom Corbett signed into law four years ago, Vogler says. The fee generates about $225 million per year and most of the money is distributed to counties and townships where drilling is most active. During the last fiscal year, Lawrence County received $400,000 as a result, the commissioner says.

“Each of our 27 municipalities and townships in Lawrence County got money last year,” he says. “If they host a site, they get more money.”

Linda Nitch, executive director of the Lawrence County Economic Development Corp., says that Hilcorp continues to make investments in the county despite the weak oil and gas market.

One reason why, Nitch says, is that Hilcorp is a privately held company that doesn’t have thousands of shareholders that larger energy companies must answer to, such as Royal Dutch Shell’s onshore drilling subsidiary, SWEPI.

Shell was the first energy company to drill the Utica in Lawrence County, and Nitch recalls that many favored leasing land owned by Lawrence County Economic Development Corp. to the energy giant as opposed to dealing with Hilcorp.

“There were those who looked down on Hilcorp and favored Shell,” she says. Ultimately, the agency signed a leasehold agreement with Hilcorp, which has since drilled three wells on a single pad. “They’re basically pleased with everything they’re seeing,” Nitch reports. “They’re being patient and waiting for pipelines to be put in.”

Shell, on the other hand, has all but retreated from its drilling operations in the northern tier of the Utica, Nitch observes. “It’s good that we went with Hilcorp,” she says. “We’ve got gas coming out of the ground.”

Shell might be the one corporation that could spur a transformation of the entire economy of western Pennsylvania, Nitch says. The energy behemoth is considering building a $4 billion ethane cracker plant in Monaca, Pa., that would convert ethane gas from the Utica and Marcellus shale plays into polyethylene, a base ingredient for thousands of products.

The southern border of Lawrence County is just 15 miles north of the site Shell has selected for the proposed project – a former zinc manufacturing site along the Ohio River, Nitch adds. Should construction on the cracker plant proceed, economic development specialists have said the project would draw a cluster of petrochemical interests to this part of western Pennsylvania.

Lawrence County, Nitch relates, is in a perfect position to capture a sizeable portion of this business.

“Right now, we haven’t seen anybody take options on land speculating on the cracker plant,” she says. “But, some landowners are getting prepared.”

Nitch points to the county’s decision in 2013 to extend a Keystone Opportunity Zone designation to the Harry Werner farm just off Interstate 376 in North Beaver Township. “He’s put that land up for sale,” she says, marketing it as prime commercial property. Other large landowners are taking a wait-and-see approach regarding Shell’s decision.

“They’re holding tight and waiting,” Nitch says. “Developing the I-376 corridor is a real possibility.”

Copyright 2024 The Business Journal, Youngstown, Ohio.