The former Blue Ridge Mountain Resources (formerly Magnum Hunter Resources) and Eclipse Resources tied the knot and merged at the end of February, promptly renaming itself Montage Resources (see Blue Ridge Merges with Eclipse, Renamed to Montage Resources). The newly merged entity released its first quarter 2019 update last week. We found some fascinating details about Montage’s plans for 2019.
As our headline teases, Montage indicates in their latest slide deck the company will drill one-third of all its new wells in 2019 in what they call their “Marcellus North” area (slide #21 below). Consulting a map included in the presentation (slide #20), we see that Marcellus North is located in Monroe County…Ohio! That’s right! Montage says that, “Initial delineation wells are outperforming type curve expectations, de-risking Ohio Marcellus acreage position for full scale development mode.” Meaning it just makes good economic sense to spend money drilling in the Ohio Marcellus.
We can’t get used to saying “Ohio Marcellus.” But maybe we should!
We checked the Ohio Dept. of Natural Resources website to see how many Marcellus wells have been drilled in the Buckeye State. As of May 11, 2019, there have been 67 Marcellus wells permitted and/or drilled in Ohio. In 2019 just four permits were issued, all of them to Eclipse Resources (now Montage). Two of the wells permitted in 2019 are currently being drilled, and two are permitted. All of them are on the same well pad in Monroe County.
We just can’t get over that Montage is drilling one-third of its new wells in the Ohio Marcellus this year. We find it exciting! Someone is zigging while everyone else is zagging.
If that weren’t enough, we scrolled to slide #22 which talks about Montage’s plans for drilling in the Utica condensate window, and wouldn’t you know it, another surprise! Montage has been testing the southern portion of Utica condensate window, to see if it will produce like the northern portion of the condensate window. They’ve tested the southern window by drilling four Utica wells on the border of Noble and Washington counties. No, not Washington County, PA, but Washington County, OH. We can’t remember the last time we heard of new drilling in Washington County, OH.
Finally (for us), we notice that Montage recently turned to sales a Utica well they drilled…in West Virginia (slide #24). What’s that? Why would a WV Utica well surprise us? Because it’s so bloody hard to drill a Utica well in WV.
In West Virginia there’s a regulation on the books, put there decades ago (pre-shale), that stipulates wells targeting “deep” formations including the Utica Shale must be at least 3,000 feet apart. In today’s modern shale-drilling world, multiple wells are drilled on a single pad–within a few feet of each other. But in WV, that’s not happening with Utica wells. At least, not without filing for an exemption from this arcane old regulation, a process that costs drillers about $25,000 in legal and regulatory fees. Hence, there’s very little Utica drilling in the Mountain State. A bill was floated in the WV legislature, House Bill (HB) 2834, which would have changed the spacing restrictions for deep Utica wells to allow multiple wells on the same pad. Unfortunately the bill died in the Senate.
So the fact that Montage went ahead and drilled a single (for now) Utica well and got it hooked up to sales is noteworthy. Not many drillers are drilling Utica wells in WV.
Here’s a copy of the full slide deck from Montage, with all of those fascinating slides:
It’s somewhat hard to analyze Montage’s 1Q19 financial and operational performance because of the two companies merging in the middle of the quarter. So we won’t try. Below is a copy of the Montage 1Q19 update with financials.
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