Magnum Hunter Resources Corp (MHR): This Company Begins Drilling Utica Shale

Houston-based Magnum Hunter Resources Corp (NYSE:MHR) recently announced that it has commenced drilling on its first horizontal well in Ohio’s Utica – a vast shale rock formation located in the Appalachian Basin and thought to have massive hydrocarbon potential.

The well, operated by Magnum Hunter Resources Corp (NYSE:MHR)’s subsidiary Triad Hunter LLC, which retains a 100% working interest, lies on a four-well pad in Ohio’s northern Washington county, about 30 miles south of Cambridge. Triad has already spudded the well’s vertical pilot hole and intends to drill the vertical section soon.

Magnum Hunter Resources Corp (NYSE:MHR)

The company plans on gaining valuable insight into the well’s characteristics by running extensive logs and cores. Well cores are usually cylindrical rock samples that provide important information about a well’s porosity and permeability, while logs are continuous measurements of well properties taken by electrically powered instruments that can provide crucial information for evaluating a well’s potential.

After it runs logs and cores, Triad intends to drill a lateral of 6,000 feet or more, with plans for a frack stimulation and further testing toward the middle of the year.

Magnum Hunter in the Utica
Magnum is among a handful of major Utica operators, commanding just over 61,000 net acres in the play. In February, the company acquired roughly 15,500 gross leasehold acres in the Utica, which are located primarily in Noble County, Ohio. Judging by offset well results and industry analysis, roughly half of Magnum Hunter Resources Corp (NYSE:MHR)’s Utica acreage lies in the play’s wet-gas window.

Magnum Hunter Resources Corp (NYSE:MHR)’s CEO, Gary C. Evans, recently said that the Utica will be “a major focal point” for the company this year. The company has said it intends to drill at least four Utica test wells in Ohio this year. Depending on how strong the results are, it may choose to develop its leasehold position further throughout the year.

Like several other Utica operators, Magnum Hunter Resources Corp (NYSE:MHR) has held off on drilling new wells in the Utica until infrastructure constraints ease further. As a result of producers’ reluctance to drill new wells, Utica production growth remained quite modest over the past year.

In fact, one of the only companies that remained fairly active in the play in 2010 was Chesapeake Energy Corporation (NYSE:CHK), the largest leasehold owner in the Utica, which currently has 14 rigs operating in the play. Though Chesapeake Energy Corporation (NYSE:CHK) has scaled back its expectations about the Utica’s oil potential, it remains optimistic about the play’s overall potential and plans on ramping up production substantially this year.