YOUNGSTOWN, Ohio -- Just because BP America is abandoning its interests in the Utica shale play doesn’t mean another company can’t make a go of it, an industry spokesman suggests.
“Absolutely,” responded Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, when asked if BP’s Utica acreage would be attractive to another energy company.
BP announced Tuesday (READ STORY) that it would sell the 105,000 leasehold acres it has in the Mahoning Valley, including 84,000 acres in Trumbull County it leased from 1,900 landowners for $3,600 per acre and 17.5% royalties on production.
Last month, Houston-based Halcon Energy Corp. announced it is suspending drilling operations in the Utica Shale this year, and cited poor results from most of the test wells it drilled in Mahoning and Trumbull counties.
BP, which operates around the globe, basically compared what it had in the Utica to other assets and “made a business decision,” Chadsey said. “What it means for the Utica is it continues to help us understand the borders of this play as we learn about the geology.”
“Just because it didn’t work for BP doesn’t mean” it wouldn’t work for another company, he continued. Perhaps a smaller company that doesn’t have assets around the globe and can focus its attention on the local formation might have better luck in developing it.
The acreage likely would be attractive to a company smaller than BP that can move faster “and they may be a little bit more focused” on the play, agreed Tom Humphries, president and CEO of the Youngstown/Warren Regional Chamber.
BP’s announcement “didn’t quite catch us by surprise” although it was “a little bit disappointing,” he acknowledged. “What we were hearing is that they didn’t see this fitting into their portfolio as they originally thought. In fact, I think they’re pulling back a bit on shale in general in North America and they did tout us as one of the biggest locations for that opportunity.”
Humphries sees little immediate economic impact from BP’s decision. The landowners have benefited from the lease payments. “The minerals and the shale and the gas and the wet gas and the oil is all still there,” he pointed out. “It’s a matter of who’s going to go get it.”
Additionally, the supply chain sector that the region has built over the past three years isn’t dependent on local extraction activity, Humphries noted. At a recent meeting in Columbus with representatives of JobsOhio, the state economic development agency, Humphries said he was told Canton, with which the Mahoning Valley competes for supply-chain activity, is a “distant second” in terms of securing development.
“We’ve done a good job in getting these companies here, well over $5 billion and 4,000 jobs,” he said. “That industry is there to support the oil and gas in the field and I think we approached it in the right way.”
"BP will be missed," said Dan Pecchia, president of Pecchia Communications, the Canfield public relations firm that represented BP shortly after it announced the mineral rights agreements in Trumbull County. "The local and Houston leaders seemed genuine about doing all the right things here," he said. “They honored their commitments to landowners and seemed deeply interested in what local people thought of the company. They freed up sizeable sums for local donations, and also sought out the best beneficiaries for those donations.”
In addition to the publicized activities, BP also donated money and time privately, Pecchia said. “From Day One, they were emphatic about safety, equal opportunity and their willingness to share more information than most in the industry about the details of their drilling activities," he added.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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