Exxon Ties Into Big Shale Gas Play

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A couple of years ago, Oklahoma City-based Chesapeake Energy (NYSE: CHK  ) was so completely enthralled with its work in the Barnett Shale of North Texas that it moved its annual meeting to the Dallas-Fort Worth area to highlight its successes in the area. Included was a discussion of the company's active drilling programs on the grounds of the Dallas Forth Worth International Airport, where the company had a number of rigs working.

But The Wall Street Journal recently noted that ExxonMobil (NYSE: XOM  ) is making hay in the Horn River Basin of far northern British Columbia. Indeed, the biggest member of Big Oil has drilled several wells in the basin, each of which has yielded in the vicinity of 16 million to 18 million cubic feet of gas per day. That's about quintuple the output of a typical Barnett well and right up there with the wells drilling in the prolific Haynesville Shale (which encompasses parts of Louisiana, Arkansas, and Texas).

The natural gas world has become saturated with shale almost overnight. Indeed, just a few years ago we thought our gas supplies were dwindling and that we'd be forced to import gas in liquefied form from abroad. Now, however, we have a raft of shale plays, including the Barnett, the Haynesville, Arkansas' Fayetteville, and the Marcellus Shale, located primarily in Pennsylvania. As a result, we also have gas prices far lower than any of us might have predicted.

These days, everybody who is anybody among the independent producers is especially active in the Haynesville, including Petrohawk (NYSE: HK  ) , Forest Oil (NYSE: FST  ) , and Comstock Resources (NYSE: CRK  ) . Beyond that, there are several U.S. shale plays that have yet to be explored.

But given its role as the largest publicly owned oil and gas company, Exxon is acting in a manner decidedly different from its peers. Not only has it found success outside the U.S. in the Horn River -- along with the likes of Calgary-based EnCana (NYSE: ECA  ) -- but beyond that, it's leased acreage and will look for shale gas in parts of Europe. Unlike BP (NYSE: BP  ) , which has bought into existing successes, Exxon, with its recognized technological capabilities, is exploring on its own.

As many Fools know, ExxonMobil is one of my favorite purveyors of oil and gas. Now, however, a company that has built its legacy as an oil producer is adding a new chapter to its story. It'll be an interesting one to keep up with.

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Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned above. He does welcome your questions or comments. Chesapeake Energy is a Motley Fool Inside Value recommendation. The Fool owns shares of Chesapeake Energy. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy contains absolutely no gas.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 15, 2009, at 12:34 PM, msbshooktx wrote:

    Exxon Mobil issued a statement that indicated the test volumes for the Horn River Basin gas wells were grossly overstated. My sources tell me only one zone was perforated in each of the two wells. The Wall Street Journal extrapolated the volumes for what the figures might have been for a multi-zone perforation, which is standard in a production well. These two wells are exploratory wells. Nevertheless, the Horn River Basin is going to be a major part of Exxon Mobil's North American natural gas portfolio.


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