Liquids, including light oil, are setting Granite Wash apart from other unconventional gas developments. Oklahoma City- based Chesapeake, the third-biggest producer of U.S. gas, said April 13 that its Granite Wash operations have the highest rates of return in the company.

Producing 1,000 barrels of gas liquids or oil a day would be worth about $82,000 at current futures prices. An equivalent amount of dry gas would be worth less than $30,000.

Apache's first horizontal well at Granite Wash, drilled more than two miles below ground, extracted enough oil and gas to pay for itself in three months, the Houston-based company said. It will produce for decades.

Shale-gas development, pioneered in the 1990s in the Barnett formation of North Texas, made such success possible, said John Crum, president of Apache's North American operations.
The company previously drilled conventional wells at Granite Wash for 15 to 20 years. He said wells didn't produce enough gas to be profitable until prices got to "reasonable levels."

Top Leaseholders
Producers knew Granite Wash, which stretches from Texas into western Oklahoma, had liquid hydrocarbons, Crum said. It took horizontal drilling to apply enough pressure to pull liquids out of the ground along with the gas, he said.

Chesapeake said it has 190,000 net acres in Granite Wash, making it the leading leaseholder. Forest, which is one-fifth Chesapeake's size by market value, pitched analysts on the impact that its 94,000 Granite Wash acres could have.

"If you want value out of the Granite Wash, I really think you need to own us," Chief Operating Officer J.C. Ridens said at a March 18 meeting in New York.

Leo Mariani, an analyst at RBC Capital Markets in Austin, Texas, said Granite Wash will become "very significant" for exploration and production companies over the next couple years. "It's clearly on the forefront of a lot of E&P companies' minds," he said.

Eoin Treacy's view Unconventional gas has changed the economics of the energy sector due to its presence in the politically secure USA, and potentially Europe and Asia, its abundance is helping to contain prices and natural gas is the least polluting of the fossil fuels.

Coal is testing its relative highs compared to natural gas near 14 times and would need to sustain a move below 13 to question scope for further appreciation. Oil is currently trading at more than 20 times natural gas prices and is looking somewhat overstretched. Nevertheless, oil would need to deteriorate considerably and/or natural gas rally impressively for the ratio to fall back below 15. Also see Comment of the Day on March 9th.

Apache Corp continues to range mostly above $100 and would need to sustain a move below $97 to question the consistency of the medium-term uptrend.

Forest Oil continues to form a first step above the base and would need to sustain a move below $23 to question scope for a successful upward break over the medium term.

Anadarko Petroleum remains in a consistent uptrend as it approaches a potential area of resistance near the 2008 high at $80. However, a sustained move below $65 would be required to trigger an MDL stop and question the consistency of the medium-term advance.

EOG Resources successful broke above $100 three-weeks ago and a sustained move below $90 would be required to check potential for additional upside beyond a brief pause.

This article from Bloomberg focusing on the European gas market and today's meeting of the Gas Exporting Countries Forum may also be of interest.