Operators in Utica Shale Favored Oil Despite Lower Prices: AR, CHK, GPOR
Through the latter part of 2014 and much of 2015, operators in the Utica shale shifted their drilling to more liquids-rich parts of the play despite the falloff in oil prices, as seen from analysis available on the DISCERN Energy platform (Figure 1).
While oil prices fell a bit more steeply than natural gas prices over the period (based on NYMEX), basis and takeaway constraints may have added to the increasing role of liquids production out of the region.
However, our analysis also shows that several operators are seeing a material increase in brine production as liquids are targeted (Figure 2). Increased brine production could add to production and disposal costs. Depending on the relative price of the commodities, these added costs could flip the relative attractiveness of targeting liquids vs natural gas at certain points of the cycle.
Figure 1: Utica Shale results are targeting more liquids-rich parts of the play (% liquids on y-axis).
Figure 2: However, increased brine production appears to be accompanying the higher liquids ratio (brine volume on y-axis).
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