By
Toby Shute
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September 11, 2008
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Other than extolling XTO Energy's (NYSE: XTO ) extension into the play, I haven't written too much about the Marcellus shale since it caught my eye back in December. With a regional lease sale just concluded, I figured it's high time we take another look.
After a massive land grab by the likes of Chesapeake Energy (NYSE: CHK ) and Range Resources (NYSE: RRC ) , it appears that the easy leasing may be ceasing. You're now seeing companies going to auction and bidding against one another, which can get expensive. And look who showed up with half a dozen high bids alongside resource hound Anadarko Petroleum (NYSE: APC ) : It's none other than ExxonMobil (NYSE: XOM ) !
Maybe ExxonMobil has been active in Appalachia for a while now, but the firm's interest in Marcellus gas is news to me. With other majors like BP (NYSE: BP ) already making major onshore moves, it's only a matter of time before ExxonMobil drops a similar bomb. And the giant's not going to cobble its leasehold together in piecemeal fashion. If ExxonMobil's interest in the Marcellus swells, it's going to swallow a leading player whole.
So who's the likely bait? We know that Chesapeake is looking to sell a quarter interest in its massive stake. The only question there is whether Exxon's willing to go splitsies, or needs to have full control. In the latter case, Range Resources and Chief Oil & Gas would seem to be the most natural targets. Chief has already built up and sold a multi-billion dollar asset to Devon Energy (NYSE: DVN ) in the Barnett Shale, so the privately held firm has already gotten a taste for takeovers.
Granted, it's still extremely early stages in the Marcellus. Range, for instance, has only drilled about two dozen horizontal wells to date. ExxonMobil probably wants to see more results before it really cracks open the checkbook. The company's preliminary interest is a strong tell nevertheless.
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