The Horn River Basin is still seen as an attractive play by many exploration and production companies, even as the industry shies away from natural gas development in other areas due to lower prices.

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Beginning Stages Of Development By The Industry

The Horn River is in British Columbia, Canada, and has seen the beginning stages of development by the industry over the last couple of years. The area has multiple formations to explore and develop at various depths.

Devon Energy (NYSE: DVN) has 170,000 net acres in the Horn River area, and the company has drilled and completed three wells to date. It plans to drill seven more horizontal wells in 2010, with the results of four of these due in the third quarter of 2010. Devon Energy has compared its acreage in the Horn River to the Barnett Shale, and the company estimates having 1,600 drilling locations with gas content at 150 billion to 300 billion cubic feet per square mile.

Quicksilver Resources (NYSE: KWK) has 130,000 net acres under lease here, and it is initially developing the Muskwa formation. The company has drilled four wells here to date with the first results expected this summer. Quicksilver Resources has to drill 10 wells here to hold the balance of its acreage. The company is also examining the Exshaw oil formation on its acreage and said that it has encountered this formation in the four wells that it has drilled to the Muskwa. (Learn more in The Industry Handbook: The Oil Services Industry.)

Exxon Mobil (NYSE: XOM) has a huge position in the Horn River Basin, and it disclosed during a recent conference call that the company has drilled 10 horizontal wells here to date. Exxon Mobil is currently completing two of the wells. Previous wells here by Exxon Mobil in 2009 produced at initial production rates between 16 million and 18 million cubic feet per day.

Other companies are rushing to secure a place for any future production from the Horn River. EOG Resources (NYSE: EOG) recently purchased a 49% interest in a company that is building a liquefied natural gas (LNG) plant on the Western Coast of Canada. The Kitimat LNG project will cost $3 billion CAD and have a total capacity of 700 million cubic feet per day of natural gas. (Use a global view to determine which stocks belong in your portfolio; see A Top-Down Approach To Investing.)

Apache Corp. (NYSE: APA), which owns the other 51% of the Kitimat LNG facility, is also developing the Horn River Basin. The company plans to drill 15 wells here from three separate pads and complete a total of 30 wells. Apache Corp. also has exposure to the Horn River Basin through EnCana (NYSE: ECA), its joint venture partner in the area.

Demand From Asia Expected In Long Term

Investors may be bearish on natural gas prices, but exploration and production companies are still putting capital into the Horn River Basin, in anticipation of demand from Asia in the long term.

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