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At Everflow Eastern, the oil and gas business has changed over the years



Published: Mon, July 1, 2013 @ 12:00 a.m.

By Jamison Cocklin

jcocklin@shalesheet.com

CANFIELD

A little more than a century ago, when the Lima-Trenton field in northwest Ohio was booming, the state was considered the “Middle East” of oil and gas production.

The oil field was discovered in 1884 at a depth of 1,092 feet in Findlay. Just 70 years before, Ohio laid claim to the country’s first discovery of oil, when in 1814 a saltwater well driller stumbled across the substance at 475 feet underground along Duck Creek in Noble County.

The U.S. is home to about 31 oil- and gas-producing states, but Ohio has a rich history of drudging up the resources. Over the decades, booms in Morrow and Washington counties and the famous Drake well in 1859, which launched an industry just over the state line in Pennsylvania, helped give rise to wildcatters and pioneers here that crafted a history befitting the excitement that surrounds today’s Utica Shale boom.

But often overlooked among the billions in investment that have flooded the state in recent years, and the seemingly never-ending coffers of multibillion-dollar oil and gas companies such as Shell, BP and Chesapeake, are the smaller producers who were headquartered and doing business in Ohio long before the heavyweights ever touched down to develop the Utica.

Everflow Eastern is one such company.

Headquartered in a nondescript building on West Main Street in Canfield, the company got its start as Everflow Eastern Inc. in February 1979.

It counted itself as a general partner in drilling programs throughout the 1980s. It would seek out investors to finance vertical, or conventional, wells, drilled straight down to a depth above 4,000 feet on tracts of land owned by a farmer or two.

Shortly after his arrival at the company in 1988, as Everflow’s chief operating officer and vice president of finance, Bill Siskovic took part in a move that gave the company more independence and allowed it to rely less on investors for those well programs.

In 1990, Everflow Eastern Partners LP was formed. The company rolled the interests of all its wells into a master limited partnership, and all the investors were brought under one wing.

Today, Siskovic serves as president of Everflow, and he manages that partnership with four others.

“We’re not drilling near as many wells as we used to — the price of gas is down because of all this Utica production,” Siskovic, 57, said. “It’s great they’re here, developing the state’s resources, but the drawback is the big guys. They’re all over the place. When we go to lease acreage, it’s already under lease by the bigger companies.”

Though the Utica Shale boom has slowed the region’s smaller companies down, Siskovic says Everflow is still profitable and operating in its own corner of the market.

“We’ve established a good base here. Our wells continue to produce, and they are making money even with gas at $3 or $4 per thousand cubic feet,” he said. “We’ve stayed afloat because back when we drilled these wells, gas was worth more and many of our wells will continue to produce for 30, 40, maybe even 60 years.”

Everflow, like other smaller producers in Ohio, has not drilled a single well in the Utica Shale formation, and it has rarely benefited from the boom, cutting a few deals here and there for some of its deep mineral rights with larger companies.

The Utica formation starts at about 6,000 feet underground, and the technology required to drill to that depth, turn at a 90-degree angle, or more, and extend the well horizontally at a range of up to 7,000 feet for fracking is too costly and better left to the larger companies such as Chesapeake.

On average, a Utica well costs between $5 million and $10 million to develop, and the high-tech methods of extracting the oil and gas trapped in impermeable rock thousands of feet below the surface generally mean a higher rate of return and higher prices for leasing land that smaller companies can’t pay out.

“It’s a much bigger play, and there’s more experienced players,” Siskovic said. “The cost of a Utica well is more than 10 times what we pay for a single well. By definition, just the size of these things automatically forces the little guys out of the picture — they can’t afford it.”

Still, if you ask him, the business has been good to Siskovic.

He grew up in Brookpark, just outside of Cleveland and attended St. Ignatius High School. After that, he went to the University of Notre Dame before graduating from Cleveland State University with a bachelor’s degree in accounting.

In 1980, Siskovic said, he was hired on the spot at an oil and gas company in Lorrain.

“It’s been good for me,” Siskovic added. “It’s unique, and once I got into it I found my own little niche that most accounting graduates don’t think about it. It’s a different animal, and it’s been something I’ve really enjoyed and grasped.”

Over the years, the job has been a learning experience. In 2010, when Thomas Korner, the company’s previous president, retired, Siskovic took over.

He’s dabbled in a bit of everything along the way, from petroleum engineering to geology and business management.

Today, he lives in Canfield with his wife and three children.

Since he first arrived at Everflow, the company has drilled more than 1,000 wells, with about 400 others that it operates in tandem with small oil and gas companies under joint ventures.

“Anytime those companies have an acreage position close to ours, we sort of have to work together and split it because we might be leasing in the same area,” Siskovic said. “We have to, or it wouldn’t get done at all. We work together rather than against one another.”

That differs from Everflow’s relationship with larger exploration and production companies, which Siskovic said can sometimes be difficult to negotiate or deal with if they’re working close by.

Siskovic estimated that Everflow has about 30,000 acres under lease. The company drills in the Clinton Sandstone, a gaseous formation that sits just above the Utica at 4,500 feet or so.

Everflow’s business is about 85 percent gas and 15 percent oil. Its gas is piped into Dominion East Ohio’s distribution system to power homes and businesses throughout the area, while the oil is sold locally to companies such as American Refining Group and Ergon Inc.

The company does not use horizontal hydraulic fracturing, the method most commonly used to extract shale reserves.

Instead, Siskovic said Everflow probably drills more directional wells than any other company in the state.

The method has been used since the 1920s but has improved since then. It allows operators to drill at multiple angles, not just vertically, often from a single well bore, or hole, to help maximize returns.

The wells are still stimulated with fracking, a process that uses water, sand and chemicals to crack rock formations and release oil and gas, but it does not return as much of the substances as horizontal drilling does.

Directional wells require more land because they are drilled deeper and reach farther than a vertical well. As a result, Everflow has to secure more mineral rights than it would with a vertical well.

Directional well pads often require anywhere from 10 to 200 landowners in a drilling unit, Siskovic said.

Everflow operates in Mahoning, Trumbull, Stark, Summit and Portage counties, with a small footprint in the southeastern part of Ohio and in western Pennsylvania.

Despite the challenge of competing with larger companies that are here to develop the Utica, Siskovic said the company will continue to drill wells, secure land and maintain its assets throughout the state.

“The price of poker has gone up, but all we want to do is keep our hands in the game,” he said. “There’s more than enough out there for our appetite, and we’re bigger than a lot of small companies.”


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