Company revives interest in shale
Akron-based group acquires Halcon’s assets in Appalachia
WARREN — Several years ago, BP America and Halcon Resources Corp. drilling operations in the northern Utica shale grinded to a halt, but Pin Oak Energy Partners, an Akron-based oil and gas company, sees a future in the remains of those operations.
“Halcon made the decision that they were going to leave the basin. Their expectations were not realized,” Mark Van Tyne, Pin Oak chief business development officer said. “Pin Oak was able to transact with Halcon and acquire all their assets in the Appalachian basin, which included wells and leases and whatnot.”
This includes seven wells in Trumbull County, as well as equipment and gathering lines, the Grenamyer well in North Jackson in Mahoning County and the two wells in Mercer County, Pa.
“We’ve acquired producing assets from Halcon and Halcon also acquired two of the three wells from BP,” Van Tyne said. “And the acreage that came with it was a follow on transaction with Halcon.”
The company also announced in February the successful acquisition of 70,000 leasehold acres in the Northern and Southern Utica, concentrated in Trumbull, Mahoning and Mercer counties.
Van Tyne clarified the acres have been acquired as a consequence of their push to acquire assets across the Appalachian basin, and they have not begun the leasing phase in anticipation of starting production.
“There is a slight misconception that we are out actively leasing. We are not at, this stage. What we are doing we are acquiring producing assets, cash-flowing assets,” he said. “Those transactions came with acreage, came with leases.”
Once they have developed their plan for these assets, they will acquire the necessary leases for further development and production.
“Back in the day, the idea was just to do a land grab and get everything you possibly could and then start drilling,” he said. “We are a little more pragmatic in our approach … At some point in time, after we evaluate the potential for these areas and these assets, we’ll probably fill in leasing and start to expand leasing. That will probably be sometime next year.”
While the area did not prove profitable for BP America and Halcon, this has presented an opportunity to Pin Oak.
“Entry costs are one thing. We can get in at an attractive entry cost versus, right now, if we were going to go and try to buy wells or assets in the counties that everyone refers to as the core. It would be a multiple of what we’ve been able to acquire these for,” he said. “We hope the area has strong opportunity, though it may not be as widespread as in other areas.”
In addition, he said companies like BP America and Halcon laid the foundation for profitable exploitation of the resources.
“The first movers into areas utilized the technology and the understanding of geology that were available at that point in time, and things have changed and been enhanced,” he said. “As an industry, we can look back at the thousand of wells that have been drilled and try to understand why some areas are better than others.”
While Pin Oak might expand drilling in the Utica in the Valley, drilling has far from ceased despite BP and Halcon’s faltering — with 20 of the 25 wells drilled in Mahoning and Trumbull’s slice of the Utica actively producing as of Feb. 3.
Raymond Beiersdorfer, a professor of geology at Youngstown State University and an anti-fracking advocate with experience in the oil and gas industry, was particularly critical of drilling in the Utica shale.
“The risks haven’t changed, and the more we are finding out, the worse they are getting. One of the big concerns I have with the Utica is that it is 450 million years old. It is the oldest shale in the U.S. that they are fracking. These shales, the same reason that they are rich in organic matter makes them rich in uranium, which overtime decays, along the way to lead, to radium and radon,” he said. “It makes it a public health hazard. Radium behaves like calcium, it is water soluble, and eventually it leads to bone cancer, and radon is the second-leading cause to bone cancer after smoking. … The Utica and the Marcellus are both very high in radioactivity.”
A John Hopkins Bloomberg School of Public Health study found radon levels in U.S. homes in Pennsylvania have risen since fracking of the Marcellus shale began, with structures located in areas of high density shale gas mining having “significantly higher” readings than other areas.
The Environmental Protection Agency estimates radon is responsible for about 21,000 lung cancer deaths each year.
Beiersdorfer said the benefit of fracking is not worth a relatively paltry rate of job creation. In 2016, the core shale-related industries employed 10,662 people in Ohio, representing about .1 percent of employees, and industries indirectly involved employed about 178,238 people, representing about 3 percent of employees.
“That has always been a lie about the number of jobs. In fact it is even less now,” he said. “If you look at jobs per unit, it is the lowest. If you wanted to create jobs, you’d go with developing photovoltaic energy.”