Apache (NYSE:APA) has disclosed a large position in the Liard Basin in Western Canada and has referred to this new natural gas play as the "best shale gas reservoir in the world."

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Liard Basin
Apache has leased a 100% working interest in 430,000 net acres in the Liard Basin in British Columbia. The company estimates that its properties contain 210 Tcf of natural gas in place, with 48 Tcf of net resources. The basin is located nearby the slightly better known Horn River Basin, another large natural gas resource play where Apache and several other operators have acreage.

SEE: Natural Gas Industry: An Investment Guide

Apache is targeting the Lower Besa River First Black Shale formation and has drilled three wells into this formation to date. The company reported that the Apache D-34-K well produced an average of 21.3 million cubic feet of natural gas per day during the first thirty days of production.

This is an immense production rate and dwarfs the initial production rate from any wells in other natural gas plays in North America. The results are even more surprising when one considers that Apache drilled and completed the well with only a 2,900-foot lateral and a six stage hydraulic fracturing operation. The other two wells were drilled vertically, but also produced at prodigious rates of 9.8 and 4.6 million cubic feet per day.

SEE: Uncovering Oil & Gas Futures

Apache development model in the Liard Basin calls for wells with lateral lengths between 7,050 and 8,040 feet and 18 stage hydraulic fracturing operations. The company estimates that the estimated ultimate recovery (EUR) on these wells will be 66 Bcf. Apache expects Liard Basin wells to generate an IRR of 12% at natural gas prices as low as $2.57 per Mcf.

The company is not rushing to develop the Liard Basin due to the low price of natural gas, and will drill slowly here in 2012 and 2013. The company's long-term plan is to transport production from the Liard Basin to the Kitimat liquefied natural gas (LNG) plant currently under construction, or to existing pipelines owned by TransCanada (NYSE:TRP) and Spectra Energy (NYSE:SE).

Other companies that have drilled wells into the Liard Basin, although not into this particular formation, include Chevron (NYSE:CVX) and Amoco, which was purchased by BP (NYSE:BP) in the late 1990s.

SEE: Accounting For Differences In Oil And Gas Accounting

The Bottom Line
Apache's new natural gas play in British Columbia adds even more to the large horde of natural gas resources in North America. Although there is too much supply of this commodity in the market today, this resource base will one day be an essential part of the global supply of energy.

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

Related Articles
  1. Stock Analysis

    Is Now the Right Time to Buy Brazilian Stocks?

    Examine the current state of the economy of Brazil, and learn why there may be some reasons for investors to look for a rally in Brazilian stocks.
  2. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  3. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  4. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  5. Investing Basics

    How to Think About Seasonality Trends

    Investors benefit when company research incorporates seasonality trends that predict relative strength and weakness throughout the calendar year.
  6. Chart Advisor

    These 3 Charts Say Now Is Not The Time To Buy Commodities

    Traders are turning their attention to the charts of commodity stocks to get a better idea of the future trend. We'll take a look at three stocks from different segments of the basic materials ...
  7. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  8. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  9. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  10. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  1. 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 >>
  2. 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 >>
  3. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  4. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  5. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  6. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!