The Eagle Ford Shale will see a large amount of development in 2012, as exploration and production companies continue to crowd into this popular play in South Texas. While the large operators that are active here typically get the most attention from investors, there are also small-cap companies that investors should review. (To know more about oil and gas, read Oil And Gas Industry Primer.)

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Small Cap Players
GeoResources (Nasdaq:GEOI) has 25,000 net acres of exposure to the Eagle Ford Shale and is involved in an area of mutual interest in the play with Ramshorn Investments, Inc., an affiliate of Nabors Industries (NYSE:NBR).

GeoResources plans to drill between 21 and 24 gross wells into the Eagle Ford Shale in 2012, compared to the nine gross wells expected to be drilled in 2011. The company has allocated from $74 million to $86 million in capital for this development in 2012.

GeoResources has 167 drilling locations on its acreage and estimates that its resource potential ranges from 58 million to 83 million barrels of oil equivalent (BOE). The company expects its wells to have an average estimated ultimate recovery between 350,000 and 500,000 BOE.

Abraxas Petroleum (SMCAP:AXAS) has approximately 12,100 net acres prospective for the Eagle Ford Shale and is involved in a joint venture here. The company is at an early stage of development and drilled its first four wells here in 2011.

Abraxas Petroleum didn't have to fund these wells as the costs were covered by the $75 million drilling carry from its joint venture partner. The company estimates the remaining drilling carry at $39 million, which should cover most of its 2012 capital requirements here.

Penn Virginia (NYSE:PVA) is also working on the development of its Eagle Ford Shale properties and has 14,700 net acres under lease. The company is transitioning its production base away from natural gas and plans to use the Eagle Ford Shale to help accomplish this goal.

Penn Virginia recently suffered a setback and had to reduce production guidance by approximately 12% for the fourth quarter of 2011. The company now expects total production of 10.7 to 11.0 Bcfe, down from the previous guidance of 12.2 to 12.7 Bcfe.

Penn Virginia attributed the reduction to a delay in completing Eagle Ford Shale wells and the use of a new and lower estimated production profile for wells in this play.

Despite this impediment, Penn Virginia is not moving away from development of the Eagle Ford Shale. The company expects 14% of its total production in 2011 to come from this play and has approximately 140 drilling locations to develop.

The Bottom Line
Energy investors that want exposure to the Eagle Ford Shale in 2012, but are tired of investing in the large-cap sector, should examine smaller players that are active here. An investment in these players has the potential for a higher return along with the commensurate higher risk. (For additional reading, check out A Guide To Investing In Oil Markets.)

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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