Appalachian Basin

Utica Remains Gulfport Energy’s Main Focus in 2013

During Gulfport Energy’s 4th quarter earnings call, Gulfport CEO Jim Palm reiterated that the Utica/Point Pleasant will be their number one priority in 2013.  Gulfport Energy spudded 14 gross wells in 2012 with 2 in production, 8 wells completed and in their resting period, 2 wells waiting to be completed, and 2 wells currently being developed.  Their acreage position has grown to 137,000 gross acres and as detailed in the call, Gulfport Energy’s focusing their capital in Ohio.

I’d like to reiterate again that the Utica is our primary go-forward focus, and we are allocating our capital accordingly.- Jim Palm, CEO Gulfport Energy, Gulfport Energy Management Discusses Q4 2012 Results – Earnings Call Transcript- Seeking Alpha

Gulfport’s development plan definitely reflects this statement.  While they plan to develop 50 wells this year, Gulfport intends to ramp up their rig count to 4 horizontal rigs in April to give them a head start in case they accelerate their development program later this year.  With four horizontal rigs and two top hole rigs, operating in the Utica, Gulfport plans to focus more on pad development this year with developing two wells per pad at a time.

The focus on pad development will help keep well costs down, which are currently around $9.6 million, and quicken the time to get the wells online.  Gulfport is taking the two well per a pad approach instead of five or more at one time due to the need to get these wells online in a quicker time frame.  It also allows them to come back to develop more wells at a later date and time, maximizing their turnaround time in the future.

During the first half of the year, we will be actively pad drilling, typically drilling 2 wells off the same pad location at once. Many wells will be drilled off of existing pads, which will enable us to capitalize on the existing pipeline, the infrastructure and accelerate spud sales cycle times and revenues, by drilling more wells on locations that are currently in service or soon will be in service.- Jim Palm, CEO Gulfport Energy, Gulfport Energy Management Discusses Q4 2012 Results – Earnings Call Transcript- Seeking Alpha

Thanks to pipeline infrastructure being built out by MarkWest Energy, Gulfport will be able to get their wells online at quicker pace than in 2012 allowing them to take full advantage of the Utica/Point Pleasant’s true potential.  This is helped even more by them developing wells on already existing pads with existing infrastructure.

While they are focusing on pad development, Gulfport will continue to work on the science portion of developing the Utica.  Developing proper well spacing is paramount to ensuring that companies are maximizing the value of the Utica/Point Pleasant.  Statutorily, vertical wells need to be spaced every 1,000 feet.  Gulfport feels this well spacing is actually disadvantageous to shale development and horizontal laterals.

If we are able to prove closer spacing, we stand to unlock literally hundreds of additional locations for us to drill, substantially increasing the ultimate impact of the Utica to our story.-  Jim Palm, CEO Gulfport Energy, Gulfport Energy Management Discusses Q4 2012 Results – Earnings Call Transcript- Seeking Alpha

Well spacing will be one of Gulfport’s main science experiments this year. Since the earlier a company can identify the proper spacing as well as completion techniques, the more the resource will be opened up for development.  This will lead to increased production and well placements, giving companies more wells to develop and more resources to extract which will extend the life of Utica/Point Pleasant development in Ohio.

To help determine the proper spacing, Gulfport is trying a unique science experiment that they have dubbed the Darla well.  The Darla well will be a 3 well pad with the laterals designed in a fan shape.  The fan shape will begin at 300 foot spacing between the heels of the laterals to 1,300 foot spacing at the toe of the laterals.  The purpose of this is to find the best distance to space the wells.  To do this Gulfport will use tracers, micro-seismic, optic fibers and different solutions to determine if the laterals are communicating and which perforations are producing the best.

The other unique part of this experiment will also they will also be working on three different completion techniques to figure the best treatments for their operations.

Then when we frac it, we’re going to use 3 different frac designs. Two of them will have 550,000 pounds of sand per stage. Stages are about 240 feet long. And the other one will have about 300,000 pounds of sand in that stage. But the — one of the — one’s that 500,000 pounds will have CARBO Ceramics in there, which may make a better well. – Jim Palm, CEO Gulfport Energy, Gulfport Energy Management Discusses Q4 2012 Results – Earnings Call Transcript- Seeking Alpha

Gulfport is taking a very technical approach to the Utica because they see the true potential this development will have on their operations.  Once the science is complete and the infrastructure is built out, Gulfport Energy will have all of the tools in place to capitalize on this unique opportunity.  Thankfully this opportunity is taking place right here in Ohio.

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