DUG East: Key Players Eye Increased Production In Utica
PITTSBURGH—The Utica Shale play has been undervalued and underappreciated given its large size and diversity of hydrocarbons, according to an executive for Encino Energy LLC.
“The Utica will really surprise people going forward,” Ray Walker, COO of Encino Energy, told more than 600 attendees at the DUG East conference on June 19.
Encino’s 900,000-acre Utica Shale leasehold has over 900 wells in Ohio. The company continues to expand its footprint with advancements in technology in the gas-rich play, which has “favorable economics and infrastructure,” according to Walker. Last year, Encino bought Chesapeake Energy Corp.’s holdings in the Ohio portion of the Utica Shale play for $2 billion. Chesapeake was one of the first companies to move into the Utica Shale, locking up enough leases to become the shale play’s biggest producer.
Walker said that 70% of Encino’s Utica production is sold on the Gulf Coast, 20% at the Dawn, Ontario, hub and 10% in Appalachia.
Referring to Marcellus and Utica as one of the biggest gas resources in the planet, Walker said consolidation will eventually happen.
Ray Walker, Chief Operating Officer, Encino Energy
“We at Encino view ourselves as consolidator, not consolidatee,” Walker said. Encino Energy is backed by the Canada Pension Plan Investment Board.
“We’re not your typical private equity company and Canadian Pension Plan is, I think, the third largest in the world,” Walker said. He believes the pension plan is a unique model with long-term investments generating cash flow, which encouraged him to come out of his brief retirement. He explained that producers have revolutionized the gas industry in the United States, producing about 2,549 MMcm (90 Bcf) of gas per day, one-third of which comes from Utica and Marcellus. “LNG is making leaps and bounds across the industry and we’re not far away from gas becoming a global commodity, much like oil is,” Walker said.
Reflecting on some of the key lessons learned as a shale player, Walker said, “It’s about having a consolidated position—you have to be way up on the technology curve, be a low-cost producer, have low cast evacuation routes…Everything from idea generation to burner tip has to be managed.”
There is a strong need to optimize operations using data generated from artificial intelligence, machine learning and predictive analysis, he added.
“If you’re not doing that, you’re not going to survive the new industry we’re in,” Walker said.