Utica Play A Three-Way Opportunity For Midstream

A brand new shale useful resource play rolled out by EOG Assets (EOG) may shake up the state of midstream within the Appalachian Basin, creating new alternatives to deal with and transport pure gasoline, NGLs and crude.

In its 3Q22 earnings, EOG introduced the shock entry in Ohio concentrating on the “Utica Combo” on the western fringe of the Marcellus and Utica shales. EOG mentioned it has acquired leases for 395,000 internet acres in jap Ohio for ~$500 million, together with about 135,000 mineral acres within the southern a part of the play. The producer has drilled 4 wells confirming the Utica Combo useful resource and is guiding to a 20-well program for 2023.

Through the earnings name, executives mentioned EOG will goal the liquids-rich “unstable oil window” of the Utica shale, estimating 60- 70% of output can be oil and NGLs with the steadiness as residue gasoline. Essentially the most prolific nicely drilled to this point produced over 3,500 boe/d from a 12,000-foot lateral, administration mentioned.

The three-stream improvement may open new alternatives for midstream investments. We see long-term potential for MPLX (MPLX), EnLink Midstream (ENLC) and Williams (WMB) to offer providers to EOG and probably different producers if the Utica Combo takes off. For instance, ENLC operates the Ohio River Valley (ORV) condensate line, which may take liquids. Previous to the EOG announcement, we estimated the ORV system would contribute ~$2.5 million in EBITDA to ENLC.

Moreover, there may be ample spare gasoline processing capability in jap Ohio to accommodate provide progress and enhance midstream returns. EOG mentioned it is going to construct its personal gathering however plans to make use of third-party services to course of the wealthy gasoline. Vegetation that would take EOG volumes embrace Kensington (WMB), MPLX’s Cadiz and Seneca, and Berne (Blue Racer). The MPLX system has a mixed 1.3 Bcf/d of processing capability however is working beneath 40% utilization (see chart).

Fuel pipeline egress additionally isn’t as urgent a priority on the western facet of the basin. Given drilling within the area, we estimate EOG would produce ~30 MMcf/d of residue gasoline after a full yr from a 20-well program. Our present estimates for egress capability in our Northeast Provide and Demand Forecast exhibits ample room for the small enhance in residue manufacturing.