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Utica Producers Gearing Up for Rover?

Having completed tree felling in Ohio by March 31, Energy Transfer’s Rover pipeline is back on track for partial in-service by July and completion by November. With several additional pipeline projects slated to increase regional takeaway, it looks like Marcellus and Utica producers will get their long-awaited wish of additional pipes out of the region. The question remaining is, will they be able to ramp drilling activity fast enough to meet their impending firm commitments with new production and does the end market need the volumes?

The first phase of Rover is slated for completion by July and will connect 2.8 Bcf/d of capacity from Ohio supply laterals to the 3.25 Bcf/d Mainline, which connects with Panhandle and ANR at Defiance, Ohio as shown in the map below. The second phase of the project is set for November and will continue the build out of supply laterals in West Virginia and Southwest Pennsylvania, in addition to the Market segment that will move gas north from Defiance for delivery into the Michigan and Dawn markets via the Vector pipeline.

Utica Producers Gearing Up for Rover?

With the project moving closer to completion, how have the producers who are committed shippers on Rover reacted? The map below takes a closer look at Rover’s Ohio Supply Zone, highlighting wells drilled by five of the primary Rover shippers since January, with the colored ovals indicating approximate operator acreage.

Utica Producers Gearing Up for Rover?

As shown in the above map, Antero Resources (NYSE: AR), Ascent Resources, Eclipse Resources (NYSE: ECR), Gulfport Energy (NASDAQ: GPOR), and Rice Energy (NYSE: RICE), who hold a combined 2.3 Bcf/d of commitments on Rover, have significant acreage holdings around Rover’s supply laterals. These companies also hold 1.3 Bcf/d on other upcoming projects in the area that are expected to enter service in November and allow Marcellus and Utica production greater access to growing Southeast and Gulf Coast markets.

With the backlog of DUCs decreasing, producers will need to significantly increase drilling levels if they are to fill this new capacity. The chart below shows Ohio drilling activity for the same subset of producers. Drilling by these five producers has more than doubled since November, with Ascent and Gulfport accounting for the bulk of this activity while Rice, Antero, and Eclipse have had smaller increases.

Ascent appears to be ramping up drilling activity to meet the company’s upcoming 1.5 Bcf/d of commitments on Rover and TCO’s Leach Xpress project planned for November service.

In the company’s fourth quarter earnings call, Antero stated that they would accelerate Utica completions once they saw ‘spades in the ground’ for Rover and plan to draw their current inventory of 70 DUCs down to 30 by the end of the year. Meanwhile, Gulfport is currently running six rigs in Ohio but has stated that they plan to increase completions in the summer, while Rice had planned for Rover Phase I to be online by November.

While important for individual operators, this potential incremental production will have far reaching consequences on a national market that has seen Mexican exports and LNG exports surge from just a year ago. Although two consecutive warm winters have helped mitigate stress on the market, demand will continue to grow as Cheniere turns on its fourth LNG train at Sabine Pass and Dominion’s Cove Point begins to take fuel gas. With infrastructure constraints lifting, will Marcellus and Utica producers ramp up fast enough to meet the market’s growing demand?

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