Midwest Seeing Oil And Gas Development

Investors might be surprised to know that the Midwestern region of the United States is experiencing a fairly active oil and gas development program, mostly driven by smaller exploration and production companies. This development is going on across Illinois, Indiana, Michigan and Ohio, and is needed to add as much supply as possible to help what many think will be soaring future demand for energy. IN PICTURES: 9 Ways To Trim The Fat From Your Spending

Rex Energy (Nasdaq:REXX) is active in the Illinois Basin where the company is working on a tertiary recovery project in the Lawrence Field. Rex Energy is injecting an alkaline surfactant polymer (ASP) into older wells in this field in an attempt to enhance recovery of the oil in place. This is not the only field the company has in the Illinois Basin, as Rex Energy is the largest oil producer here and has more than a dozen areas spread across Indiana and Illinois.

PDC Energy (Nasdaq:PETD) is working on the Ohio Tecumseh project and has leased up 50,000 net acres. The project was started originally in the early 1990's, and PDC Energy is betting that improved seismic technology will make the play more successful that before.

PDC Energy will spud two wells here in August 2010 and estimates an average ultimate recovery of 0.25 Bcfe per well. Since the wells will be low cost to drill, the company is looking at an IRR of above 50% here.

Linn Energy (Nasdaq:LINE) is active in the Antrim Shale, one of the lesser known natural gas shale plays that have garnered so much attention from the industry and investors. The Antrim Shale is in the northern part of Michigan and Linn Energy bought a large position in March 2010 establishing a new core area for the company. Linn Energy paid $330 million and received proved reserves of more than 266 Bcfe, along with 1,350 operated wells producing 30 million cubic feet equivalent per day of natural gas.

Linn Energy was attracted to the Antrim Shale because of the low decline rates of the wells here, which decline at an average rate of 6% percent per year. The company estimates the properties have a reserve life of about 24 years. Linn Energy will not just milk the wells for cash flow, but has 300 locations to develop on the 263,000 gross acres.

Atlas Energy (Nasdaq:ATLS) is also developing properties in the Antrim Shale, where the company has proved reserves of 522 Bcfe. The company drilled 46 vertical wells here in 2009, and is looking at horizontal development of other shale formations on its acreage.

The Midwest is not usually known for oil and gas development but is seeing an active development program in some areas. These efforts will be needed to meet the demand for energy over the long term. (To learn more, check out our Oil And Gas Industry Primer.)

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