Chesapeake Energy Corp.'s position in the Utica shale increasingly seems to be on the outside looking in, according to a report by Bob Brackett, senior analyst with Bernstein Research.

New data released by Ohio's Department of Natural Resources at the close of 2013 provides a picture of 400 wells drilled in the play, with more than 250 producing.

Antero Resources Corp. and Gulfport Energy Corp. have the best results, with Hess Corp. and Chesapeake lagging, Brackett says. Hess has higher total rates than Chesapeake, but but with a higher gas percentage.

In short, the core is getting better, smaller and farther from Chesapeake's holdings, Brackett says. “Chesapeake is clearly the Utica leader, but we note a significant gap between Chesapeake results and wells by Antero and Gulfport, with only two of the top 20 wells in the play, despite having more than six times the wells producing versus its nearest competitor.”

Anadarko Petroleum Corp. and Devon Energy Corp. have also seen deflated results, though they have drilled fewer than a dozen wells compared with Chesapeake's 163.

Range Resources Corp. has a Utica footprint but no wells in Ohio's database as yet.

“The sweet spot of the Utica is increasingly well-defined and localized,” Brackett says. “Utica activity is still relatively early, based on land retention and rig programs,” but volumes could grow from 0.4 billion cubic feet per day (Bcf/d) in third-quarter 2013 to multiple billions per day.

Chesapeake has invested heavily in the Utica, with $3.5 billion spent in Ohio on exploration, production and royalty payments to landowners.

Utica production is a relatively trivial fraction of the company's total production of about 0.165 Bcfe/d, or less than 6% of Chesapeake's total third-quarter 2013 production.

“We believe that the Utica play contributes to Chesapeake's multiple,” Brackett says. “As such, these less impressive results are a net negative on the stock.”

Some 668 Utica wells have been drilled, according to Ohio's database. The average Utica well takes just under four months to drill and complete, Brackett says.

“A rig in the Utica can complete perhaps three to four wells per year,” Brackett says. Current activity is a combination of retaining acreage and identifying the core. Pad drilling is not yet the predominant method.

If each well holds a section (640 acres), then 430,000 acres of the Utica have been held by drilling.

Since millions of acres have been leased, “we are only part way through the land-retention program,” Brackett says.

—Darren Barbee