The search for future energy supplies has led the exploration and production industry to the A-1 carbonate formation present in parts of Michigan. The interest in this play demonstrates the extent to which the onshore United States is being picked over by the industry.

Investopedia Markets: Explore the best one-stop source for financial news, quotes, and insights.

Michigan Oil and Gas
Although Michigan is not known for being a major center of oil and gas activity, oil was first found here in the 1880's and the first commercial well was discovered in 1925 in the Lower Peninsula area. Production peaked in the late 1970's and most current activity and production in Michigan are from the Antrim Shale formation. The industry has known about the Michigan A-1 carbonate for many yearsm, as this formation was the source rock for the Niagaran Reef play, a prolific play that has been producing for decades.

Active Operators
Devon Energy (NYSE:DVN) has a new ventures group within the company to evaluate new areas to invest. This group has 1.1 million acres under purview, a budget of $350 million and plans to drill 30 exploratory wells in 2011.

Devon Energy has identified the A-1 carbonate as one of these new venture plays, and has a 300,000-net-acre position in the Michigan Basin that is prospective for this formation. Devon Energy has drilled two vertical wells into the A-1 carbonate and is currently analyzing the data before proceeding further.

No other public companies have disclosed any leasehold in Michigan prospective for the A-1 carbonate formation. There are a number of operators that are active in Michigan that might have rights to this formation through acreage that is held by production.

Atlas Energy was a large operator in Michigan with several hundred thousand acres under lease and existing production from the Antrim Shale. The company touted some of this acreage as prospective for the Utica and Collingwood Shale. Atlas Energy was purchased by Chevron (NYSE:CVX) in early 2011.

BreitBurn Energy Partners (Nasdaq:BBEP) also has extensive operations in Michigan and reported that 59% of the company's total production originated from here in 2010. The company lists some exposure to the Utica and Collingwood Shale in its marketing presentation but doesn't mention a carbonate play in Michigan.

Continental Resources (NYSE:CLR) has a small position in Michigan and back in 2007 it was developing the Trenton Black River formation. The company has since moved on to better opportunities in the Bakken and Cana Woodford, but still held 58,000 net acres in Michigan at the end of 2010.

Chesapeake Energy (NYSE:CHK) assembled a large position in Michigan several years ago as interest spiked in the Collingwood Shale. The company has now found better opportunities in the Utica Shale in Ohio.

EnCana (NYSE:ECA) also put together a large leasehold in Michigan to test the Collingwood Shale. The company holds 425,000 net acres here and is drilling two wells with first results expected in the third quarter of 2011.

The Bottom Line
Although investors should be wary about assigning too much value to undeveloped oil and gas plays, the proficiency of Devon Energy in finding new sources of oil and gas suggests that the A-1 carbonate formation will likely be successful. (For additional reading, take a look at A Guide To Investing In Oil Markets.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  2. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  3. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  4. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  5. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  6. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  7. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  8. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  4. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Trading Center