American Energy Buys 130,000 Acres

ST. CLAIRSVILLE – Former Chesapeake Energy CEO Aubrey McClendon plans to drill at least 1,600 Utica Shale wells over the next decade on the 130,000 eastern Ohio acres his new American Energy Partners firm acquired this week.

Many Ohio mineral owners who signed leases with Hess Corp., XTO Energy, Phillips Exploration and Paloma Resources now have contracts with McClendon’s Oklahoma City-based firm. His company stated its acreage is in the “core of the play, defined as southern Jefferson, Belmont, eastern Guernsey, Harrison, Monroe and Noble counties.”

The deals bring American Energy Partners’ Utica Shale acreage holdings to about 260,000 acres.

After working in the Utica for nearly three years, New York City-based Hess Corp. is selling 74,000 Ohio acres to the McClendon firm for $924 million. Hess originally entered the Utica via its $750 million purchase of Marquette Exploration in 2011.

“While our wells in the dry gas portion of the Utica were highly productive, we concluded that the potential returns from such an investment – at current and projected natural gas prices – no longer justified retaining this acreage as a strategic part of our overall liquids-based asset portfolio,” said John B. Hess, Hess CEO. “The sale of our Utica dry gas acreage is an example of our continued commitment to grow shareholder value through ongoing portfolio reshaping.”

However, Hess said his company will retain its liquids-rich properties in the Utica. In 2013, the company drilled 29 and fracked 24 wells its Utica Shale joint venture with Consol Energy. Hess plans to use $550 million to frack wells this year.

“We plan to increase our expenditures in the emerging Utica Shale play to $550 million from $455 million last year as we focus our activities on the appraisal and development of the wet gas window,” said Greg Hill, president and chief operating officer for Hess.

The Hess Capstone 2H9 well, located near Flushing in the area of Ohio 331 and Dutton Drive, produced 2,242 barrels of oil equivalent per day early last year. This means the well yielded an amount of energy equal to what would come from 2,242 barrels of oil, although the well may not be producing a substance that is chemically considered to be oil. From April through June, the Hess Richland B well near the Jamboree In The Hills site produced 2,985 barrels of oil equivalent per day.

Fort Worth, Texas-based XTO is a subsidiary of Exxon Mobil, the world’s largest publicly owned oil and natural gas company. XTO holds many leases in eastern Ohio, as many mineral owners – including the Union Local Board of Education and the Martins Ferry Board of Education – agreed to lease land for $4,950 per acre with 19 percent payments on production royalties. The company also controls the leases local residents may have previously signed with Phillips Exploration.

Randy Cleveland, president of XTO, said American Energy Partners will take over 30,000 XTO acres in Belmont, Jefferson and Harrison counties, while XTO will continue to hold 55,000 Utica acres.

“We just initiated development in the Utica and are encouraged by results from our initial well that is producing at a peak 30-day rate of about 15 million cubic feet of dry gas per day,” Cleveland said. “The agreement funds near-term development of a substantial operating position in this emerging play.”

McClendon and Robert Murray, founder and CEO of St. Clairsville-based Murray Energy Corp., are clashing over the use of the term “American” to describe their eastern Ohio energy operations. American Energy Corp. operates the Century Mine near Beallsville.