The Youngstown Vindicator
Disappointing well results have prompted BP to announce this morning that it will pull out of the Utica Shale and take a $521 million write-off on its acreage in Trumbull County, the company said in its quarterly earnings report.
BP said it plans to sell its approximately 100,000 leased acres in Trumbull County and the surrounding area.
“BP couldn’t make this work, but that doesn’t mean someone else can’t,” said Mike Chadsey, spokesman for the Ohio Oil and Gas Association.
BP started leasing land in Trumbull County in early 2012. It has four active wells there, and the company completed its drilling and completion activities at the end of last year. But according to statistics released by the Ohio Department of Natural Resources last week, the fourth quarter returns were less than spectacular.
Citing those results and a desire to concentrate on other onshore plays in the lower 48 states, BP announced that it had decided not to pursue further development on its leasehold, becoming the second major driller in as many months to pull out of the region.
Halcon announced in March that it was suspending its drilling operations, pending results from two wells.
Though it had found success with the Kibler well in Lordstown, Halcon’s two other Trumbull wells—and one in Mahoning County—showed lackluster returns, according to the ODNR figures.
Drillers have so far struggled to unlock the Utica Shale in the northern tier of the play because it is thinner and located at a shallower depth than it is the south, where production in Carroll and Harrison Counties has skyrocketed.
Drillers looking to buy up BP and Halcon leaseholds face much uncertainty and the threat of poor returns, Chadsey said, citing the murkey status of the state’s severance tax proposal and local earthquakes as possible deterrents.
“That’s going to put a damper on some risk-taking,” he said.
Instead, Chadsey sees the Mahoning Valley and its manufacturing infrastructure as playing a supporting role in the play, at least for the near future.