Published on February 14, 2014
How to Invest in the Utica Shale Drilling Boom
Utica Shale Overview Scale of the play • Locations: Ohio, West Virginia, New York, Maryland and Pennsylvania • Size: Extends 170,000 square miles Photo credit: Public Domain
Utica Shale Overview Reserve Potential Estimates • Recoverable oil: 1.3 to 5.5 billion barrels of oil • Recoverable gas: 3.75 to 15.7 trillion cubic feet Photo credit: Flickr/Don O’Brien
Utica Shale Overview Land grab • Three most recent acreage sales averaged $12,500+ per acre • Median acreage sales since late 2011 averaged $8,800 per acre Photo credit: Flickr/_J_D_R_
Utica Shale Overview Economic boom • Sales receipts in Ohio are up 10%+ in the strongest shale counties • Employment growth is currently offsetting losses in other industries Photo credit: Flickr/www.LendingMemo.com
An Investors Guide to the Drilling Boom • Dozens of public and private exploration and production companies have acquired acreage that’s prospective for the Utica Shale. • Not all top acreage holders offer the same investment focus on the Utica. • Only a handful of companies are really levered to the play and therefore offer the most upside to investors.
Source: Magnum Hunter Resources Investor Presentation
A Closer Look at the Top Five • Rankings are based on leverage to the play, not total acreage position. • The top five offer investors the most direct “pure-play” on the Utica Shale, though all five are diversified outside of the Utica.
EV Energy Partners (NASDAQ: EVEP) Utica position: 173,000 net acres • Additional overriding royalty interest in 880,000 gross acres • Midstream investments: Utica East Ohio and Cardinal Gas Services • Currently marketing wet gas acres and pursing a joint venture in volatile oil acres Source: EV Energy Investor Presentation
Magnum Hunter Resources (NYSE: MHR) Utica position: 99,240 net acres • Estimated resource potential is 496.2 MMBoe or more than half of company’s total resource potential • Recently announced its first Utica Shale gas discovery. Source: Magnum Hunter Investor Presentation
Chesapeake Energy (NYSE: CHK) Utica position: 1,000,000 net acres • Largest operator • Drilled over 450 • About half still waiting to be completed • Spending 15% of 2014 capex on Utica Shale Source: Chesapeake Energy
Gulfport Energy (NASDAQ: GPOR) Utica position: 147,350 net acres • 88% of 2014 capex spending in the Utica Shale • 981 gross drilling locations • Net probable reserves of 18.18 MMBoe Source: Gulfport Energy Investor Presentation
Halcon Resources (NYSE: HK) Utica position: 142,000 net acres • Completing the evaluation phase of its Utica potential • Drilled nine wells • One of the wells was the most liquids rich in the northern portion of the play Source: Halcon Resources Investor Presentation
Key Investor Takeaways • Gulfport Energy and Chesapeake Energy are the most established operators. • Gulfport is more focused on the Utica Shale. • Magnum Hunter Resources and Halcon Resources are still drilling initial wells. • Best reward potential, but higher risk. • EV Energy offers upside from land sales, but as an MLP exploration growth isn’t its focus.
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