The Utica Shale vs. the Eagle Ford Shale debate has drawn a lot of attention since Chesapeake announced a 1.25 million acre position in the Utica Shale. Aubrey McClendon’s comments have gotten a lot of traction:
As a result of its analysis, the company believes the Utica Shale will be characterized by a western oil phase, a central wet gas phase and an eastern dry gas phase and is likely most analogous, but economically superior to, the Eagle Ford Shale in South Texas.
That quote sent many articles to the press touting the Utica Shale as the new great shale play and made many Texans wonder if we’d lose some drilling rigs to Ohio. You can track the rig count yourself with the Eagle Ford Shale Drilling Index that is updated each Friday, but if you don’t have the time, the counties where the Eagle Ford is present have seen more than 40 rigs come into the play over the past three months. That’s more than 10% of the total U.S. onshore rig count (230+ rigs) working in an area that is economically inferior. The catch, it’s possible, but the Eagle Ford shouldn’t lose much if anything.
We’d like to see an open debate between Chesapeake and other operators like Anadarko, BHP, EOG Resources, Petrohawk, and Marathon Oil. I doubt the guys that have poured billions into the Eagle Ford will agree. But if the hype is true, you’ll see rigs working in both plays and will not have to worry about the Utica pulling resources away from Texas.
While the Utica Shale likely has areas that provide better economics than parts of the Eagle Ford, it is hard to imagine any drilling rigs leaving for Ohio. Natural gas rigs deployed in other parts of the country are far more likely to make the move. Natural gas is trading below $4 per mcf as of August 2011. That’s not what most plays need to make an economic return and you’ll see more drilling shift to liquids plays like the Utica and Eagle Ford.
Not every acre in any play will be economic. We’ve seen how a highly touted play can do a 180 in the Haynesville Shale and we’ve even experienced a little of that in South Texas. Most recently, Petrohawk abandoned its Red Hawk Field in Zavala County. That means that Zavala County might face more challenges than we thought, but Dimmit County, DeWitt County, Gonzales County, Karnes County, LaSalle County, and Webb County will likely benefit as rigs move within the Eagle Ford.
In summary, I don’t think the entire Utica will prove to be economically superior to the entire Eagle Ford, but I do believe you could read between the lines and say that Chesapeake’s Utica Shale acreage looks to be better than Chesapeake’s Eagle Ford Shale Acreage.
In short, the Eagle Ford and the Utica look to be big resource wins for the U.S.