The remarkable rock in the Barnett Shale of North Texas eventually may be the largest natural gas find in the United States, industry experts said Monday. But the "next Barnett Shale" may be out there, with similar shale formations in more than half of the Lower 48 states.

Speaking at Platts' Shale Gas Developer conference in Houston, oil and gas veterans who work in the Barnett agreed that the North Texas shale is the place to be for unconventional gas. Dozens of independents and major producers are buying up acreage and merging with other producers in the 13-county area around Fort Worth, with some paying $4,000-$5,000 for an acre that sold for $50 two years ago.

Drilling is no longer confined to the prairies and rural farmlands of Texas; Barnett exploration is now taking place below golf courses, in the backyards of ritzy housing developments and near skyscrapers. And no wonder: the region was producing about 1 Bcf/d two years ago; today, it's around 2.5 Bcf/d.

"Barnett is the king of resource rock and shale plays," said Mark Whitley, senior vice president of Range Resources. Whitley should know. He worked for the original Barnett kingpin Mitchell Energy and Development Corp., which current kingpin Devon Energy bought in 2001. "There is a tremendous resource there, and we have huge resources to work on. There is only one Barnett, but there are others with the same kind of potential. We just have to find the keys."

Phil DeLozier, vice president of business development for EOG Resources Inc., said EOG estimates Barnett's total reserve potential is between 500 Tcf and 1,000 Tcf. EOG is one of the top leaseholders. "This is our playground."

John White, an energy analyst with Natexis Bleichroeder Inc., said the Barnett "continues to show strong economics even using a $5/MMBtu gas price assumption." The main reason is "predictability, due to the almost zero dry hole risk and very low operational risk. In a gas price environment where operators began to prioritize drilling prospects between conventional prospects and Barnett shale wells, we believe the core area of the Barnett shale will remain a high priority for near-term drilling activity."

So far, lower gas prices are not having much effect on the Barnett, and in fact, may fuel more merger and acquisition activity. On Monday, Chesapeake announced it will pay $825 million to buy more Barnett acreage (see related story). Devon, the Barnett's leading leaseholder and top producer, paid $2.2 billion for second-place Barnett producer Chief Oil & Gas in May. And earlier this month, XTO Energy said it would acquire Barnett producer Peak Energy Resources for XTO shares valued at $105 million.

"The Barnett has hit on all cylinders," said DeLozier. "There are a ton of reserves there..., and there's a lot more to do there."

Even with the pullback in gas prices since 2005 and "continued concerns given high levels of gas storage," Natexis ran several versions of its Barnett shale economics model. After examining the data disclosed by active operators in the Barnett, Natexis' primary assumptions found that completed well costs were about $1.8 million, lease operating costs were $1.30/Mcfe, and a basis differential to Henry Hub was $1/MMBtu.

With 2 Bcfe of reserves at an average production rate of 1.2/MMcf/d in year one, the "play is still showing strong returns under the pricing scenarios of 1) $6.00/MMBtu flat, 2) $5.00/MMBtu for the first six months and $6.00 flat thereafter; and 3) $5.00/MMBtu flat," White said.

The Barnett may be the most talked about gas shale play in the Lower 48, but it is certainly not the only one of interest. The "number of companies involved in major shale plays continues to increase," said White. In November, Natexis tracked 23 producers working in shale development across the United States. "We now tally 39, and we're sure we are missing some due to the sheer magnitude of activity and companies holding leases in third-party names to maintain secrecy."

Other major shale plays that producers like include the Fayetteville play in Arkansas, which was first developed by Southwestern Energy. Two emerging plays in Texas include the Caney/Woodford and another branching off of Barnett, in Woodford. The Devonian play in Ohio is attracting more interest, along with Floyd, New Albany, Mowry and Paradox plays. The Mowry is "an early stage play in the Rockies...in Wyoming in the Powder River basin."

"I can't tell you how many times we get calls about 'the next Barnett,'" EOG's DeLozier said.

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