As if the fundamentals in the natural gas market weren't bad enough, the industry is on the verge of developing yet another multi trillion cubic feet shale play in North America. Where all this gas will go is anyone's guess at the moment.
IN PICTURES: Learn To Invest In 10 Steps
The Horn River Basin shale play is located in the British Columbia region of Canada. The area was highlighted recently by an announcement from Exxon Mobil (NYSE:XOM) back in July 2009, of the enormous potential based on four test wells drilled there by the company. The company said that it was seeing initial production (IP) rates of 16-18 million cubic feet per day and has 250,000 acres under net lease.
Another company active in the Horn River basin is EnCana Corporation (NYSE:ECA), which has 260,000 acres under its control and has been building its position since 2003. The company used the figure of 500 trillion cubic feet (TCF) of natural gas for the entire basin, and has been working to finalize the technique needed to develop this resource. EnCana has moved from vertical test wells in 2003 to the 14 stage hydraulic fracturing it will be doing on its horizontal wells in 2009. EnCana is partnered with Apache Petroleum (NYSE:APA) in this basin.
Nexen (NYSE:NXY) has an 88,000-acre position in the play. The company has only seen IP rates of 2.1 million cubic feet per day on its wells, but it has used only two-stage hydraulic fracturing to date.
EnCana and Nexen are both Canadian companies, but don't think that U.S. companies have been shut out. EOG Resources (NYSE:EOG) has 157,500 net acres under lease and has sevens wells being completed currently.
Devon Energy (NYSE:DVN) has 153,000 acres but has barely touched its acreage since it is so busy developing its core areas. The company only has one producing well so far.
Access to infrastructure is always a problem in fast growing resource plays, and the Horn River Basin is no exception. Spectra Energy (NYSE:SE) is expanding its gathering and processing plant at Fort Nelson to handle the increased production. A new facility is also planned for the region, and the company has already contacts for 790 million cubic feet per day of capacity.
It seems just a few years ago, every "expert" out there said it was impossible to grow natural gas production. We now may be on the other side of the slope, a situation where the industry can't stop growing, no matter how full inventories get and how low the price goes for natural gas. (For more, check out our Oil And Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
