Insights from Hall Kistler & Company: What has happened to the legacy oil and gas producers in Ohio after the Utica shale discovery?
By Mike Eberhart, CPA, CVA, Senior Partner
I lead the Oil and Gas team at Hall, Kistler & Company and have done extensive work in the Oil & Gas industry throughout my career. You might call the Utica shale discovery a “boom/bust” for the legacy oil and gas producers in Ohio (also known as the vertical well drillers). The “boom” has given them the ability to monetize their deep rights, namely the Utica, Point Pleasant and Marcellus shales. The “bust” for these Ohio producers is the inability to lease acreage, unless they want to pay $5,000 an acre, even if the landowner is allowed to retain their deep rights. The lease boom in the last several years has educated the landowners that they can get around $5,000 per acre. Plus, the oil and gas companies drilling the horizontal wells do not want acreage with a shallow well on it. The other part of the “bust” is the increased costs for oil and gas services and equipment due to the shale boom. The service companies and suppliers are busy with the horizontal wells and are able to charge the highest rates for services and equipment. Two questions remain going forward for these legacy producers: (1) how long will the shale boom last? And (2) will the technological advances be great enough that the cost of drilling a horizontal well is such that they can even consider getting into that business?
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