Experts not surprised by Halcon decision

BOARDMAN, Ohio (WKBN) — Those who make a living watching over the region’s growth in the oil and natural gas industry said they are not surprised by one company’s decision not to drill new wells in the area for another year.

On Tuesday, executives with Halcon Resources said they are planning to focus their attention on other oil and gas plays in other parts of the country and not make any big new investments in the Utica shale formation in Ohio and Pennsylvania. 

Bob Rea of Buckeye Mineral Development said Halcon isn’t giving up on the area but is instead going to spend the next 12 months assessing the minerals coming out of its handful of existing wells before pumping huge amounts of capital into the area.

“At $5.5 million per well, at minimum, and greater than that, and that doesn’t count their infrastructure development to get to these. So this is a major, major investment. And again, not knowing what those reserves are, what they’re going to produce, it is speculative,” Rea said. “And I think that’s what everybody is watching for in Ohio, is to see what the long-term production is going to be.”

Halcon officials said they’ll be focusing on what they’re calling “de-risked acreage” in Texas and the deep south, where production and revenues would be greater.

In a statement released overnight Wednesday by Halcon, officials said they will honor lease agreements with landowners in the area.

“It’s premature to comment on the future development of the rail terminal (Ohio Commerce Center, Lordstown) as it’s dependent on the overall development of the northern tier, not just by Halcón but by other operators in the area. Halcón will honor its commitments to landowners pursuant to the terms of the leases we have signed,” the release stated.

And although Halcon executives have stated production from existing Marcellus shale wells has not been as good as originally projected, Rea said he wonders whether the company’s decision also is based on not having enough pipeline and processing plants already in place to get the minerals to market.

At this point no one from the company is commenting about the decision or what potential impact it may have on plans for an oil storage facility in Lordstown that Halcon had proposed. 

Attorney Alan Wenger, who specializes in oil and gas issues, said even though no new wells are planned in the near future, that does not mean leased property is going to sit idle forever.

“There’s a provision in oil and gas law that says the holder of those rights under a lease has to develop them or give them up within a reasonable amount of time, assuming that there’s economic feasibility to do so,” Wenger said. “It may take a longer period of time or it may not be as much a land of milk and honey, at least in the foreseeable future, as folks envisioned.”

Wenger said Halcon has deep drilling rights on 30,000 acres locally.

He said there is still a lot of interest in gas exploration in the region, but natural gas prices are so low right now, it is not economically practical to pursue production here, as opposed to other areas that are producing so-called wet gas products, which are much more profitable.

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