Last year was not the year Utica producers were hoping to have. What was once viewed as America’s next great oil play only turned in a trickle of oil production in 2012. In fact, the 87 wells drilled by 11 different companies produced just 1,750 barrels of oil per day last year, or about 635,900 barrels of oil in totality. For perspective, the Bakken produced 674,621 barrels of oil per day in January. Suffice it to say, the Utica has a long way to go.
This is why several of the play’s producers, including Range Resources Corp. (NYSE:RRC) and EQT Corporation (NYSE:EQT) , are coming together on a joint industry project to gain better insight into the play. The project, which is expected to last at least a year, will help the companies gain a better fundamental understanding of what rock properties are the most important for good wells. The hope is that the project will enable producers to better target the play in order to earn a return.
Because of the lackluster returns so far, major oil and gas producers like Chesapeake Energy Corporation (NYSE:CHK) and Devon Energy Corp (NYSE:DVN) have announced plans to reduce operations in the play. Devon Energy Corp (NYSE:DVN), which is completely exiting the play, really had a rough year, as most of the wells it drilled were not economical. One of the issues is the oil accumulations located in the shale were in areas that lacked the pressure necessary to force the oil out of the shale. Chesapeake Energy Corporation (NYSE:CHK), on the other hand, is selling what is no longer core acreage in order to shore up its balance sheet.
Because of this, the play is a lot more gassy than originally thought, and with natural gas prices still low, it is not helping producers that had turned to the Utica for higher margin liquids. The hope is that the joint industry project will help the industry better target the more liquids-rich gas portions of the play, which would provide higher rates of return.
So far, Gulfport Energy Corporation (NASDAQ:GPOR) has had the best success rate in targeting the liquids rich part of the play. The company is spending $499 million of its $570 million capital budget this year on the Utica. Those funds will help drive the company’s production from just over 7,000 barrels of oil equivalent per day last year to more than 21,000 barrels of oil equivalent per day this year. This is mainly due to the fact that Gulfport has been drilling some of the best wells in the play.