Utica Shale Push Could Be The Next Big Opportunity in Onshore Exploration
Upstream exploration players in the U.S. are doubling their bets on the Utica shale in efforts to move toward oil rich plays. The Utica shale is estimated to hold between 1.3 and 5.5 billion barrels of oil and could be a major opportunity for growth for oilfield services like Baker Hughes (NYSE:BHI) and Schlumberger (NYSE:SLB), as explorers focus on the region to increase oil output and move away from pure gas plays. Although concerns still remain over the lack of data for the region, companies like Chesapeake are expanding their footprint in the Utica and ramping up their rig count. Higher rig counts bode well for earnings of oilfield services players.
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New play
About 223 permits have been issued for wells in the Utica shale. [1] Players like Chesapeake, Exxon and BP have invested to secure drilling rights in the area, and the rig count in the region is expected to begin to grow in the future. Chesapeake itself has 10 rigs in the Utica and plans to increase the number to 22. Interest in the shale has increased in 2012 as companies have started to take steps to move away from natural gas exploration as gas prices touched $2 /Million British thermal units (MMBtu). High oil prices are pushing players to focus on oil rich plays like the Utica Play and the Eagle Ford in Texas. Rising interest in oil exploration has helped increase the rig count in North America despite lower spending on gas drilling.
Despite optimism over the potential of the Utica shale, analysts are still concerned over the lack of data concerning the field. While most suggest that the play may be similar to the Eagle Ford play in Texas, limited data on the Utica has been a concern for some watchers.
Chesapeake has released information on 9 of the 59 wells it has drilled in the region, but there is still no information concerning the regions that are said to hold most oil. However, the overall enthusiasm surrounding the play should result in a substantial increase in drilling activity in the region, pushing up the overall rig count in North America.
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