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Ohio Department of NATURAL RESOURCES

Ohio Department of NATURAL RESOURCES. STATE OF THE PLAY. James Zehringer Director, Ohio Department of Natural Resources. STATE OF THE PLAY. 2012 Shale Production Numbers Rick Simmers, Chief of Oil and Gas David Mustine , JobsOhio Managing Director of Energy, Chemicals, & Polymers.

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Ohio Department of NATURAL RESOURCES

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  1. Ohio Department ofNATURAL RESOURCES

  2. STATE OF THE PLAY James Zehringer Director, Ohio Department of Natural Resources

  3. STATE OF THE PLAY • 2012 Shale Production Numbers • Rick Simmers, Chief of Oil and Gas • David Mustine, JobsOhio Managing Director of Energy, Chemicals, & Polymers

  4. Sensible Regulations for Ohio SB 165 SB 315 JCARR Rule Changes

  5. “Ohio is implementing lessons and best practices from around the country, and is creating a rigorous and responsive regulatory system for the new era of oil and gas development in the state.” -Daniel Yergin

  6. Historical Oil & Gas Production in Ohio Ohio’s Historic Oil and Gas Plays 1860 to Present

  7. 2012 Shale Production Numbers http://oilandgas.ohiodnr.gov/production

  8. 2012 Shale Production Numbers OIL PRODUCTION 93% Increase From 2011 635,896 BARRELS NATURAL GAS PRODUCTION 80% Increase From 2011 12,836,662 MCF

  9. Ohio’s Utica Production 12% OIL 16% GAS

  10. Utica Compared to Conventional Production

  11. How Utica Activity Compares to ODNR Projections In December 2011 ODNR Projected 200-250 Drilled Utica Wells By the End of 2012 215 Wells Were Drilled In December 2011 ODNR Projected 50 Wells In Production By the End of 2012 67 Utica Wells Were Producing

  12. Utica Permits, Drilling and Production

  13. Dry vs. Wet Gas Liquid Natural Gases (LNGs) Are Why the Industry is Here… And Why They Are Staying Natural Gas Natural Gas Liquids

  14. Midstream Processing

  15. Utica Production Compared with Conventional production

  16. Sensible Regulation Ohio Department of Natural Resources Division of Oil and Gas Resources Management Goal: Continue to Protect the Public and the Environment Without Hindering Economic Growth

  17. Sensible Regulation Goal: Continue to Protect the Public and the Environment… TENORM and Brine

  18. Sensible Regulation Goal: Continue to Protect the Public and the Environment… More Frequent Reporting

  19. Sensible Regulation Goal: …Without Hindering Economic Growth Sensible and Fair Tax Policy

  20. STATE OF THE PLAY Rick Simmers Chief, ODNR Division of Oil & Gas Resources Management

  21. 2012 Utica Production

  22. 2012 Utica Production

  23. 2012 Utica Production

  24. Shale Permits Issued

  25. Shale Wells Drilled

  26. Production by Company

  27. Drill Rig Locations

  28. 2012 Utica Production

  29. 2012 Utica Production

  30. 2012 Utica Production

  31. Midstream Pipelines and Processors

  32. Ohio Utica Shale Update ODNR Presentation 16 May 2013 David Mustine, Managing Director Energy; Polymers and Chemicals

  33. Key Observations on “State of Play” • Return expectations are strong: • CHK rate of return averaging in excess of 40%. • Gulfport rate of return of 100% for Boy Scout and Wagner wells. • Midstream infrastructure has constrained production. Bottleneck eliminated when 1 BCF of Utica processing is online by YE 2013. • More rigs active in Ohio Utica than WVa and western Pa. • Buyers market for shale acreage, even in most prolific plays (Richard Zeitis) • Many factors influence why companies buy or sell acreage: • Chesapeake selling only 10% of Utica holdings. Have also sold acreage in Eagle Ford, Mississippi Lime, Permian, Marcellus and Delaware basins. Reducing debt. • EnerVest attempting to sell Utica acreage. Strategy is to acquire, build up then sell onshore properties. Also own 2% royalty in 880,000 Utica acres. • Multi-decade inventories or development acreage are in place for many companies.

  34. Economic Impact of Shale Ohio Companies Benefiting from Shale Activity • V&M Star, Youngstown – steel tubing • Miller Supply, Inc., Wooster – oilfield supply and services • Pioneer Group, Marietta – midstream fabrication and construction • Timken, Canton – manufacturer and supplier of bearings • Ariel Corporation, Mt. Vernon – gas compressors • PotashCorp, Lima – producer of nitrogen-based products; large natural gas user • Gorman-Rupp, Mansfield – pumps used in oilfield operations • Kelchner, Springboro – construction • DBA Mutual Tool, Tipp City – fabricating

  35. Pipeline & Midstream Projects Ohio Utica Shale *Announced Gathering – Processing – Fractionation

  36. Investments in Ohio Utica Shale *Over three years, dependent upon actual rig activity

  37. Pursuing Downstream Opportunities: • Global polymer industry leader • World class university-based research and strong engineering programs • Four refineries in Ohio • Utica shale provides low-cost and reliable supply of natural gas and natural gas liquids • Possible links to specialty chemicals

  38. Pursuing Downstream Opportunities: Natural Gas Liquids Ethane/Propane/Butane Ethylene/Propylene/Butadiene Plastics/Synthetic Rubber

  39. Ohio Department ofNATURAL RESOURCES

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