Another Marcellus Shale Game-Changer - Oil

Prospects for oil and liquid gas draw Exxon into the Utica shale stakes.

John Vogel

Published: Sep 28, 2011

Exxon Mobil tipped its hand last week that it sees the Utica shale formation as a prime petroleum resource. A Reuters news item reported that Exxon is acquiring acreage in eastern Ohio for potential oil drilling.

That follows Chesapeake Energy's announcement in July that its beginning to tap natural gas, gas liquids and oil in the Utica formation. Note: That formation lies under the Marcellus shale from West Virginia north through much of New York. (See map.)

Most gas leasing contracts signed in recent years cover natural gas, gas liquids and oil in all formations, according to Jim Leonard, natural gas leasing consultant from Endicott, N.Y. Older leases, however, may not. So landowners may want to make certain they understand their lease provisions.

BIG MONEY PLAY: Confirmation of oil and liquid gas yields from the Easts Utica formation is drawing the attention of oil-giant Exxon.

BIG MONEY PLAY: Confirmation of oil and liquid gas yields from the East's Utica formation is drawing the attention of oil-giant Exxon.

July's announcement by Chesapeake Energy wasn't really a new discovery. The Utica and Devon formations underlying the Appalachian region have long been known to harbor both gas and oil. But today's drilling and recovery technology allows it to be successfully tapped.

Chesapeake's latest quarterly report indicated that the company holds 18 of the 24 permits to drill into Utica shale in eastern Ohio. The company holds 1.25 million leased acres with approximately $15 to $20 billion in recoverable products in Ohio, Pennsylvania, New York and West Virginia.

The company, according to its report, currently has five rigs drilling in the Utica Shale, with plans to have eight by the end of 2011, 16 to 20 rigs by year-end 2012 and at least 40 rigs by year-end 2014.

Chesapeake is currently conducting a competitive process to monetize a portion of its Utica Shale leasehold position through joint ventures and leasehold acquisitions. That may prove to be an open door to Exxon.