Gulfport Energy has signed 10-year agreements with Dominion East Ohio and Dominion Transmission Inc. to transport natural gas from eastern Ohio’s Utica shale to the Midwest and to connecting pipelines.
The Oklahoma energy company made the announcements Wednesday during a teleconference on second-quarter earnings and operations.
The agreement calls for shipping natural gas from the MarkWest Energy gas-processing plant at Cadiz in Ohio’s Harrison County to Wisconsin, Illinois, Indiana and Michigan for the first time, said Steven Little, Gulfport’s vice president of midstream operations.
The agreement covers up to 100,000 decatherms of natural gas per day. That’s equal to about 100 million cubic feet per day
In late 2014, an additional 150,000 decatherms, or 150 million cubic feet per day of capacity, will be available for shipment to two pipelines.
Gulfport is “in execution mode” in the developing Utica shale, Chief Executive Officer James Palm said.
Its confidence in the Utica shale is evidenced by the fact the company added 8,000 leased acres in Belmont and Monroe counties last month, he said.
Palm said Gulfport is working to add more Ohio acreage beyond its current 145,000 gross acres and plans to drill at least 70 new wells in 2014. To date, the company “has only gotten a glimpse of [the Utica’s] upside,” he said. “We’re really pleased with how things are coming.”
Gulfport reported that it started 24 wells this year in the Utica shale, mostly in Harrison, Belmont and Guernsey counties.
A total of 13 Utica wells in Ohio were in production by June 30. Gulfport expects to add four to six wells in the third quarter and 25 to 30 in the fourth quarter. Those wells produced on average of 3,524 barrels of oil equivalents per day.
Gulfport started 16 wells in the second quarter. Four are awaiting completion, three are being drilled by horizontal rigs and nine have vertical legs completed and are awaiting horizontal rigs.
Gulfport has seven rigs drilling in eastern Ohio.
The company released what Palm called “very strong” production results on two new wells in Harrison County.
Boy Scout 2-33H is daily producing 747 barrels of oil, plus 2.1 million cubic feet of natural gas and 298 barrels of natural gas liquids.
Boy Scout 4-33H is producing 519 barrels of petroleum, plus 2 million cubic feet of natural gas and 264 barrels of natural gas liquids.
Gulfport also is changing its fracking method to eliminate gels, a change that will speed up the process and reduce costs, Palm said.
Drilling a well costs between $9 million and $10 million, and the company is interested in increased efficiencies to reduce costs, he said. Getting rid of gels will provide “big savings” at every well and will result in the company using what’s called “slickwater fracking.”
The company also is testing how close together wells can be drilled without affecting production, Palm said.
“We’ve still got a lot to learn,” he said. “It doesn’t come overnight.”
Gulfport is considering drilling into the Marcellus and Utica shales from the same pads in eastern Ohio, he said.
The company is interested in tapping the lucrative natural gas liquids that might be found in the shallower Marcellus shale in addition to the natural gas only in the deeper Utica, Palm said.
Gulfport also offered the most detailed look at areas of Ohio where drillers are likely to get dry natural gas, natural gas liquids, condensate and oil.
It said 43 percent of its leased acres are in the dry gas window, 27 percent is in the condensate area, 22 percent in the wet gas area and 8 percent is the oil area.
The bands stretch south from Carroll and Columbiana counties through Harrison, Belmont, Noble and Guernsey counties. Oil is likely to the west, and dry natural gas to the east.
Palm said Gulfport is confident of “some really huge results” in the gas-only eastern area.
Gulfport reported net income of $43.8 million on oil and gas revenue of $70.2 million, or 56 cents per diluted share.
Bob Downing can be reached at 330-996-3745 or bdowning@thebeaconjournal.com.