The future of drilling in the Utica Shale’s northern tier is seen as uncertain but not bleak after Halcon Resources Corp. announced it will hold off on new drilling for the foreseeable future.
The Houston-based driller confirmed Tuesday that it has no immediate plans to move new rigs into the region, as it assesses results from two wells that are flowing back, also called resting.
Those results, expected by the end of the first quarter of the year, likely will determine Halcon’s future in the play, the company said.
In total, six Halcon wells are producing, one well is being tested, one is resting and three are waiting on pipeline and market evaluations.
Tuesday’s announcement raised concerns about the fate of Halcon’s proposed $70 million fuel depot at the Ohio Commerce Center in Lordstown.
The company said Wednesday it is “premature” to comment on the future of the rail terminal, adding that the project is “dependent on the overall development of the northern tier, not just by Halcon, but by other operators in the area.”
A handful of major producers have staked out territory in Trumbull and Mahoning counties, and Halcon has about 140,000 acres of leased land in Ohio and western Pennsylvania.
Halcon said it planned to honor its “commitment to landowners pursuant to the terms” of those leases, most of which provide five years to drill and allow the option to renew for five additional years.
Will Green, an exploration and production research analyst at the investment firm Stephens Inc., said it is unlikely that Halcon will sell off those assets any time soon.
“I don’t think that’s at the forefront of their plans right now,” he said. “I think they’re content to hold them for now.”
Halcon has slowed its leasing in the area in recent months.
Diana Marchese, Trumbull County recorder, said that of the 31 new oil and gas leases her office has processed this year, only four have been signed by Halcon.
In Mahoning County, the company has not signed any this year, according to records.
Most of the Utica’s development has moved south over the past year, where major producers such as Chesapeake and Gulfport have keyed into the more lucrative and liquid-rich “wet gas window” in Carroll, Harrison, Guernsey, Belmont and Noble counties.
Meanwhile, Halcon mainly has limited its operations to the north, turning up less-than-spectacular results.
During a conference call last month, Floyd C. Wilson, Halcon’s CEO and chairman, said results there “haven’t been too wonderful.”
“It’s no part of our spending for this year at this moment, and it’s no part of our production expectations ... for this year at this moment,” he said.
But experts said a lack of early success doesn’t necessarily doom acreage in the north.
“I don’t think its an indication that you can condemn that part of the Utica,” Green said, adding that the Utica is still in its early stages of production.
Thomas Stewart, executive vice president of the Ohio Oil and Gas Association, said he expects development to continue, as other companies step into the play.
“I think people are going to continue to work on it,” he said. “It may not be the people that are there now.”
As drilling technology matures, operators may be able to unlock the secrets to the northern geology, he said.
Meanwhile, Roland Julian of Jackson Township remains optimistic.
He said Halcon obtained rights to minerals deep beneath his Lipke Road property in 2012, and recently completed drilling a well on New Road.
“They’ve done everything they said they would,” he said. “I can’t imagine they’re just going to abandon the wells.”