What Does Barnett Shale Profitability Mean for Oil Stocks?

The Barnett Shale was once the darling of the U.S. oil and gas industry. From 2002 to 2010, it was the most productive source of shale gas in the country. However, it has fallen from its perch in recent years, losing out to more economic shale plays like the Marcellus, Utica, and Haynesville shales. The Barnett's weaker profitability meant that it couldn't compete against these more productive shale plays when natural gas prices collapsed. Because of that, many drillers cut back on spending for new wells, causing production in the Barnett to decline. Meanwhile, several other oil producers have chosen to abandon the region by selling their position for a fraction of what they paid for it during the boom years.

The Barnett Shale is a massive natural gas field that covers 5,000 square miles in Texas, and is located to the west of the Dallas-Fort Worth area. Mitchell Energy initially discovered the field in 1981, though its first wells didn't produce that much gas. However, the company continued to tweak its well designs and techniques over the next two decades and eventually found the key to unlocking the treasure trove of gas trapped in the Barnett's tight rocks. In fact, according to some experts, the Barnett is the largest onshore natural gas field in the country. That said, a significant portion of that gas sits underneath the urban areas of Fort Worth, which limits the industry's ability to access it. Furthermore, despite the amount of gas in the Barnett and the cheaper drilling costs compared to other plays, wells in the region aren't as productive, which results in unappealing drilling returns at current prices. 

Image source: U.S. Energy Information Administration.

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Source: Fool.com