The Bakken and the Eagle Ford are getting a bulk of the attention from energy investors these days. And rightfully so, as both rank at the top of the premier liquids growth plays in the country. That being said, 2013 could be the year that the Utica Shale breaks out on to the energy scene. Here are two big reasons 2013 could be the Utica’s year.
Same story, different play
Tell me if you’ve heard this story line before: Production coming out of Location X is being held back by a shortage of pipeline and processing capacity. I’m pretty sure I’ve personally spilled a lot of digital ink on the problems at the Bakken and the Canadian oil sands, both of which are turning to rail to relieve some of the pain. This is the biggest issue for these emerging resource basins.
The good news, though, for the Utica is that $7 billion in planned infrastructure investments are in the pipeline and will be coming online soon. The two companies to keep your eye on here are Dominion Resources, Inc. (NYSE:D) and MarkWest Energy Partners LP (NYSE:MWE), with Dominion Resources, Inc. (NYSE:D)’s Natrium facility and MarkWest’s Harrison County development adding much-needed processing capacity. Not only that, but both companies have entered into joint ventures that provide each with an infusion of capital to invest in future growth projects. Taken together, over the next few years these two will be building out a tremendous amount of processing and takeaway capacity, which producers desperately need.
Looking further ahead, Enterprise Product Partners‘ ATEX Express will be finished in the second quarter of 2014. Once it comes online, it will take Utica and Marcellus ethane to the Gulf Coast, which will help boost the bottom lines of producers in the region. When you add it all up, the increase in processing and takeaway capacity that’s coming online over the next year will make it much easier for production in the region to rise higher.
Producers are finding the sweet spot
There’s no denying that 2012 was a year of missed expectations, as the industry drilled only 165 wells when it was estimated that 250 would be drilled. The largest leaseholder in the play, Chesapeake Energy Corporation (NYSE:CHK) , noted that while it was satisfied with its Utica results, they did “miss the mark.” The company, though, does see its production growth accelerating this year as those new processing plants come online. That’s enough of an incentive for the company to devote 11% of its capital budget to grow its production in the year ahead.