a closer look at one of america’s next great shale plays
DESCRIPTION
Chesapeake Energy (NYSE: CHK) recently held its annual investor day. Among the many topics the company discussed was its emerging position in the Powder River Basin in the Rocky Mountains. The company sees this becoming a world-class asset. That enthusiasm isn't just being conveyed by Chesapeake Energy. Earlier this year EOG Resources (NYSE: EOG) announced that it was adding four new Rocky Mountain oil plays to its drilling inventory while Devon Energy (NYSE: DVN) noted that it was drilling high impact wells in the Powder River Basin. Needless to say with some of America's biggest shale drillers all focusing on this new play, investors need to take a closer look at its potential. To help investors gain a better understanding of the play I've put together the following slideshow. The presentation takes a close look at the emerging position of Chesapeake Energy, EOG Resources and Devon Energy.TRANSCRIPT
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.