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.