Halcon halts drills
WARREN – One of the most active horizontal drillers in Trumbull County has suspended all local drilling with no plans to return anytime soon.
Floyd C. Wilson, chairman and CEO of Texas-based Halcon Resources, said the company is turning its attention from the local Utica Shale Play to other areas of the country but will wait for production results of two recently drilled local wells.
“We don’t have any plans to move a rig in there at this time,” Wilson told investors in an earnings call last week when asked about the Utica. “We are going to just wait and see what the results are.
”They have not been too wonderful in the far north part of the play. We are just going to see how those come out. It’s no part of our spending at this moment, and no part of our production expectations at this moment,” Wilson said.
The attitude was a significant shift from an August conversation in which Wilson spoke positively about Halcon’s Kibler well in Lordstown, calling it, “one of the most productive wells in the Utica Shale Play.”
The second leg of Lordstown’s Kibler well was the most recent Trumbull County well drilled by Halcon. Drilling and hydraulic fracturing culminated last month, and the well is being flared, a process in which natural gas is burned off to reduce pressure in the line before production begins. Permits have been issued for three other legs at the site.
In November, however, Floyd was critical of production in northern Trumbull County. Halcon has horizontal wells producing in Hartford and Vienna townships. It also has at least one well producing in Mercer County, Pa., and one producing in Mahoning County with another permitted there.
The company in January voluntarily withdrew its application six days before a hearing was scheduled with the Ohio Department of Natural Resources seeking forced unitization at its Lutz well site in Warren Township. The application had been filed in November in an attempt to force local landowners to allow the company to take minerals from beneath their properties.
A local oil and gas attorney said Tuesday Halcon’s withdrawal indicates some hesitancy by the company.
The mixed messages have raised concerns by officials affiliated with the Ohio Commerce Center in Lordstown, where Halcon is planning to build a $70 million oil storage and rail-transloading terminal. The village’s board of zoning appeals in July approved a variance allowing construction of up to six above-ground 90,000-barrel tanks at the facility. The first part of that project was expected to be completed this year.
“As for our contract to move forward with the transloading, that option is still in place,” said Dan Crouse of Routh-Hurlbert Real Estate, who, along with Charles Joseph, handles real estate issues for the Ohio Commerce Center. “Candidly, all of our eggs aren’t in that basket, but that’s a big basket, and we all are worried.”
Halcon officials in December announced plans to cut capital spending in 2014. Now the company says it will turn its focus this year to the Williston Basin in the Dakota area and El Halcon in Texas. It also will begin drilling in the newly developing Tuscaloosa Marine Shale in Louisiana and Tennessee. The company’s quarterly earnings information released Thursday carried no mention of the Utica.
The company has said it has about 142,000 acres of mineral rights leased or under contract in the Utica Shale Play. The Utica Shale is a large area of eastern Ohio and western Pennsylvania known to contain large amounts of natural gas and petroleum products deep underground.
Trumbull County Road Use Maintenance Agreement, or RUMA, official Jack Simon, who works in the county engineer’s office, on Tuesday said Halcon officials remain in contact with him regarding planned installation of concrete drilling pads and road usage for new wells planned mostly for Lordstown.
Simon said he was led to believe it is inclement weather that has delayed new drilling largely because installation of concrete pads is not possible in the harsh conditions.
In addition, talks between Halcon’s transmission pipeline subsidiary are ongoing with local governmental entities about pipeline installation.
Attorney Alan D. Wenger, chairman of the Oil and Gas Law Practice Group at Harrington, Hoppe and Mitchell in Youngstown, said he experienced an abrupt change of direction in Trumbull County in his dealings with Halcon beginning around November.
“Literally, dialogue going on there, they walked away from in certain areas,” Wenger said Tuesday. “As to whether they are going to continue to develop the permits that they have, I don’t know.”
Wenger noted, however, that his experience has shown that drillers strategize on drilling locations based on gas prices and market conditions. It’s that experience that leads him to remain cautious about predicting future plans.
BP, which also holds mineral rights on hundreds of thousands of acres in northern Trumbull County, also has slowed drilling operations, raising speculation about that company’s local plans. BP has drilled six wells in northern Trumbull County. Five of the six are in production, according to ODNR records. Most of the mineral rights leases signed by BP will expire in 2017. If the wells are not drilled and in production by then, the lease would expire.