How to Invest in the Utica Shale Drilling Boom
Photo credit: Chesapeake Energy
Utica Shale Overview
• Locations: Ohio, West Virginia, New York, Maryland and Pennsylvania
• Size: Extends 170,000 square miles
Scale of the play
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Utica Shale Overview
• Recoverable oil: 1.3 to 5.5 billion barrels of oil
• Recoverable gas: 3.75 to 15.7 trillion cubic feet
Reserve Potential Estimates
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Utica Shale Overview
• Three most recent acreage sales averaged $12,500+ per acre
• Median acreage sales since late 2011 averaged $8,800 per acre
Land grab
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Utica Shale Overview
• Sales receipts in Ohio are up 10%+ in the strongest shale counties
• Employment growth is currently offsetting losses in other industries
Economic boom
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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)
• 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
Utica position: 173,000 net acres
Source: EV Energy Investor Presentation
Magnum Hunter Resources (NYSE: MHR)
• 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.
Utica position:99,240 net acres
Source: Magnum Hunter Investor Presentation
Chesapeake Energy (NYSE: CHK)
• Largest operator• Drilled over 450• About half still waiting
to be completed• Spending 15% of 2014
capex on Utica Shale
Utica position: 1,000,000 net acres
Source: Chesapeake Energy
Gulfport Energy (NASDAQ: GPOR)
• 88% of 2014 capex spending in the Utica Shale
• 981 gross drilling locations
• Net probable reserves of 18.18 MMBoe
Utica position: 147,350 net acres
Source: Gulfport Energy Investor Presentation
Halcon Resources (NYSE: HK)
• 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
Utica position: 142,000 net acres
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.
Our top growth stock of 2014
