Tickers in this Article: TOT, HAL, BP, SFY
The exploration and development of domestic oil and gas resources has soared over the last few years after the industry resolved the technological problems inherent in producing from shale and tight oil and gas formations in the United States.

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This increase in activity has put the industry under the media spotlight and moved it into the public consciousness as drilling spread from traditional areas to ones that have seen little drilling. This exposure has also led to a lot of popular misconceptions that should be addressed before they become permanently etched into the American consciousness.

Horizontal Drilling
I have read many articles where horizontal drilling is called a new technology. While it is certainly true that the technology and equipment associated with horizontal drilling is being constantly updated, this type of drilling has been around for decades. (Oil and gas investments can provide unmatched deduction potential for accredited investors, check out Oil: A Big Investment With Big Tax Breaks.)

The Department of Energy traces the first true horizontal well to 1929, when the technique was used in Texas. Other early horizontal wells include one drilled in the Soviet Union in 1937 and another at a heavy oil field in Pennsylvania in 1944.

The first large-scale commercial successes in drilling horizontally occurred in Europe and the United States in the early 1980's. Elf Aquitaine, which merged with TotalFina, which became Total (NYSE:TOT), used the technique in several oil fields in Europe, while BP (NYSE:BP) used horizontal drilling at the Prudhoe Bay field in Alaska. Both Total and BP hit their 52-week low last Friday September 23, with Total dropping to $40, and BP hitting $35.10.

Another play where horizontal drilling was used successfully was in the Austin Chalk formation in Texas, where 85% of the world's horizontal wells were drilled in 1990. Swift Energy (NYSE:SFY) was one of these operators and boasted about its 97% success rate in the Austin Chalk when using horizontal drilling. (For background reading, check out A Guide To Investing In Oil Markets.)

Another operator that achieved success in horizontal drilling in the Austin Chalk was Union Pacific Resources Co., which used to be the exploration and production subsidiary of Union Pacific Corporation (NYSE:UNP) until it was acquired by Anadarko Petroleum Corp. (NYSE:APC) in 2000. Union Pacific Resources Co. already had experience in the play and drilled 200 vertical wells in the Austin Chalk prior to launching a horizontal program.

Hydraulic Fracturing
Hydraulic fracturing is also perceived as a new technology by many observers but as with horizontal drilling, this technology has also been around for generations. The concept of fracturing actually goes back to the 19th century when operators used nitroglycerine and explosives to stimulate production in wells. One of the first recorded uses of hydraulic fracturing was in Kansas in the Hugoton field in 1947, where it was applied to a natural gas well.

Two years later the technique was licensed to Halliburton (NYSE:HAL), which used the procedure on two wells in Oklahoma and Texas. During the first year, this technique was used on more than 300 wells with an average production increase of 75%. Halliburton is set to release earnings on October 17, with analysts expecting earnings of 92 cents per share. This compares with 66 cents per share earnings in three months ending September 30, 2010.

The Bottom Line
Horizontal drilling and hydraulic fracturing are seen by many as new technologies that are untested, yet these techniques have been used for many years and are responsible for the adequate supplies of oil and natural gas. The public debate over domestic drilling is contentious enough as it is and does not benefit from the perpetuation of misinformation.

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