a closer look at one of america’s next great shale plays

A Closer Look at One of America’s Next Great Shale Plays

Photo credit: Flickr/Jeremy Buckingham

Intro

EOG Resources recently announced it was adding four new horizontal oil plays in the Rocky Mountains to its drilling inventory.

Meanwhile, both Chesapeake Energy and Devon Energy have drilled strong wells in the Powder River Basin. These companies all think this area has the potential to be a world-class oil asset.

Intro

The Powder River Basin in Wyoming is a well-known energy basin, but it’s not know for its oil. Instead, it produces about 40% of America’s coal supplies each year.

That could soon change as these companies have found the key to unlocking the oil stacked in shale layers underneath the state.

Intro

Intro

Many of those layers are proving to be profitable to these energy companies. The following slides contain investor presentation slides from each company detailing acreage positions, wells results and returns.

Chesapeake Energy

Chesapeake Energy

Chesapeake has a very large acreage position that has the potential to recover more than 450 million barrels of oil equivalent in the future. More than half of that resource is oil, which is expected to deliver a 30% rate of return for the company next year. That’s up from 16% right now as the company continues to improve its well economics by drilling faster, less expensive wells.

Devon Energy

Devon Energy

Devon Energy has about 150,000 net acres in the Rockies. So far the initial results are good as several wells delivered initial production rates in excess of 1,000 barrels of oil equivalent. Because of this it plans to drill about 30 wells this year.

EOG Resources

EOG Resources

EOG Resources

EOG Resources has much smaller positions in the play as it has about 30,000 net acres in the Parkman and 63,000 net acres prospective for the Turner. However, these positions are in the sweet spots of both plays, which when combined with EOG’s low-cost drilling is yielding 100% direct after tax rates of return.

Investor Takeaway

All three companies are drilling high impact oil-rich wells in the Powder River Basin. The Turner, Parkman and Frontier plays all are yielding compelling results with above average economics thanks to strong initial production.

Bottom line: It looks like these Rocky Mountain oil plays are the real deal and could have a big impact on returns in the years ahead.

The easy way to profit from America’s energy boom.