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Hess sees value in Utica Shale

Firm expects to operate about 80,000 acres in Ohio

US independent Hess and coal player Consol Energy are joining forces to tap the unconventional resource potential of Ohio’s Utica Shale play. As part of the deal, Hess will pay $593 million for a 50% stake in 200,000 acres Consol holds in the US shale play.

The pair will jointly develop the assets, with drilling due to start in a few weeks. They expect to have two rigs operating in the acreage next year and will gradually increase that to five by 2015.

Operatorship of assets in the Utica will be split between the two companies. Hess said it expects to operate about 80,000 acres across Jefferson, Harrison, Guernsey and Belmont counties, which are thought to be liquids rich. Consol will take operatorship in the acreage covering eastern Ohio. The joint-venture agreement does not include Consol’s remaining Utica acreage in Pennsylvania and West Virginia.

The Utica Shale, which stretches southwest from New York state and Canada to Tennessee, lies roughly 3,000 to 7,000 feet beneath the mature Marcellus Shale formation. The Utica is relatively underexplored, although Chesapeake Energy – one of the US main unconventional-gas players – has holdings of about 1.2 million acres in the play.

Chesapeake, which hopes to seal a joint venture for some of its Utica acreage by the end of next month, has not released any estimated reserves data for the Utica, but sees big potential for the play. Company boss Aubrey McClendon claimed the Utica is analogous, but economically superior to Texas’s prolific Eagle Ford Shale.

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