Ways to Play the Eagle Ford ShaleYou remember last week, when I...

Ways to Play the Eagle Ford Shale


You remember last week, when I said to forget about shale? I didn't really mean it.

My intended point was that there are other interesting oil and gas plays out there. Shale, however, is going to continue to captivate both U.S. and international players for years, and most likely decades, to come.

Take the Eagle Ford in South Texas. This one's generated a lot of buzz already in 2010. Expect more of the same going forward.

Chesapeake Energy (NYSE: CHK) and Total SA (TOT), when they announced their joint venture in the Barnett, mentioned the possibility of teaming up in the Eagle Ford. That, along with ConocoPhillips' (NYSE: COP) significant leasehold, indicates the ample size of this play.

Other large companies that are increasing activity in the Eagle Ford include Petrohawk Energy (NYSE: HK) and Murphy Oil (NYSE: MUR), which recently announced "encouraging results" from its first well.

So why are these heavy hitters interested in the Eagle Ford, out of all the shale plays out there? The key here, as with the granite wash plays that we looked at last week, is the liquids content of these wells. That means oil and various natural gas liquids [NGLs] -- all of which fetch higher prices than natural gas.

Not all of the Eagle Ford wells produce liquids, however. Mid-sized Pioneer Natural Resources (NYSE: PXD) just completed a well in the "dry gas window" of the play. As the name implies, this section just produces gas. Fortunately, the initial flow rates look high enough to justify development here.

Last week, I asked readers who they thought offered the most upside through exploitation of the various wash plays up in the Mid-continent area. Most people went with Chesapeake, which was not the answer I was expecting. Granted, the company is the most familiar to my readers, but it's so large that it would take a lot to really move the needle.

As with the wash, I'd expect a smaller company to extract the most relative value from the Eagle Ford. One firm to take note of is St. Mary Land & Exploration (NYSE: SM), a Denver-based company that's actively divesting non-core Rockies assets. St. Mary's Eagle Ford position (225,000 net acres leased and optioned, with 66,000 joint ventured with Anadarko Petroleum (NYSE: APC)) is very large for the company's size. Throw in the firm's foothold in the Marcellus and the emerging East Texas side of the Haynesville shale, and you have a pretty interesting proposition.