Is There More to the Marcellus Than Meets the Eye?

About a year ago, Continental Resources (NYSE: CLR  ) completed a horizontal well in the North Dakota Middle Bakken formation that flowed nearly 1,000 barrels of oil per day during the first week of testing. That was a fine result in and of itself, but this well's real significance lay in the fact that Continental had drilled horizontally into the Three Forks-Sanish formation, roughly 50 feet deeper than the Middle Bakken zone, in the same location during the prior year. The new well demonstrated that the two formations can produce separately, and significantly increase an operator's drilling recoveries across the same acreage.

Continental says that up to 75% of its acreage could be prospective for dual zone development. By drilling additional wells from the same well pad, this development should be very cost-effective for Continental, Whiting Petroleum (NYSE: WLL  ) , and other Bakken/Three Forks players.

Multi-zone stacked plays are nothing unique to the Bakken. Down in the Haynesville shale play, operators like Encana (NYSE: ECA  ) have suggested that the prospectivity of the Mid-Bossier could equal that of the deeper Haynesville formation. One play where we haven't heard much about the prospectivity of other horizontal intervals is the Marcellus. I'm wondering if that's set to change over the next year or so.

Operators have been tight-lipped about drilling results in formations lying above or below the Marcellus. Range Resources (NYSE: RRC  ) had this to say on its second-quarter conference call:

While we haven't said much about the other formations due to competitive reasons, we made progress identifying and quantifying the potential of the other formations and are extremely excited about their potential.

Range did report successfully drilling and completing one well in both the Upper Devonian and the Utica shale, but the company is keeping the results confidential. The company used words like "fantastic," "huge," and "tremendous" in describing the potential of these formations.

Other companies applying for permits to test formations above or below the Marcellus include Cabot Oil & Gas (NYSE: COG  ) and EOG Resources (NYSE: EOG  ) . The latter company is looking to sell about 51,000 acres in Bradford County, Pa., which is prime Marcellus country, so it's possible EOG doesn't see as much potential as the likes of Range.

It's too early to say whether Range's early enthusiasm for these stacked plays will be borne out, but investors don't appear to be paying much, if anything, for the potential of non-Marcellus horizons at present. At today's share price, I would argue that you get those other formations for free.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 23, 2010, at 12:23 PM, BobFrappels wrote:

    I posted this same comment regarding another Marcellus shale article earlier today. One of the major concerns around this drilling is the frac'ing process, the pollutants involved, and the fear of federal regulation around that.

    I've been watching a little company that could be a game changer in this space and contribute to drilling expansion. They manufacture an anolyte which was recently proven effective as a frac fluid and is completely safe. It is a certified green product. See this 8/18 press release.

    "LITTLE RIVER S.C., Aug 18, 2010 (BUSINESS WIRE) -- Integrated Environmental Technologies, Ltd. (OTC:BB IEVM) announced today that Benchmark Performance Group, Inc. has taken delivery of ten (10) more of IET's EcaFlo(R) Model C-104 units. Benchmark is installing the equipment into its Regional Distribution Center ("RDC"), located in Millwood, West Virginia. This "RDC" will begin serving Benchmark's customer needs in the Marcellus Shale region...." See the press release for the full details. Very interesting.

  • Report this Comment On August 27, 2010, at 10:48 PM, susan400 wrote:

    1Pls research- the Barnett has been drilled for 10 yrs, 10k wells, there is no fracfluid risk.

    2 absurd, because the Bakken this so the Marcellus that? Yes there are other formations, but their will add but drop in the bucket.

    the Marcellus is about the Marcellus

  • Report this Comment On August 30, 2010, at 2:05 PM, carbonates wrote:

    There are secondary opportunities in the Marcellus, and in reality there are quite a few different shales available that are near the Marcellus stratigraphically. There are also shale plays in this region that only slightly overlap the Marcellus, which is why you will see some companies stressing the Huron and the Utica for their potential. Some of these have already been proven to have potential, others remain to be proven up. Where there is overlap the issue could very well be that the "stacked plays" may be in the marginal portions of the different plays. That remains to be seen. With the slow reporting of data allowed by the regulators in this region, it is very difficult for anyone but the operators in the play to know what is really happening in these plays.

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