Judy Murray, Editor, E&P, reports from the DUG East conference in Pittsburgh, PA: The southern Appalachian Basin and the Utica shale hold promise.

According to William S. Daugherty, president and chief executive of NGAS Resources Inc., there are "tempting targets in the southern Appalachian Basin."

NGAS has seen recent successes in the Weir Sand in southeastern Kentucky and in western Virginia. These areas, Daugherty said, could allow NGAS potentially to drill 400 horizontal well locations on 70,000 acres.

"Our advantage in southeast Kentucky and western Virginia is the large land position of 315,000 gross acres with 220,000 undeveloped acres," he said.

According to Daugherty, the beauty of the play is that it is very predictable. "We are drilling with air, fracing with nitrogen, and are producing these wells with no water coming out of the pay zone. There are no water challenges."

Another factor, Daugherty said, is that horizontal drilling is allowing the company to pick up more areas and drill more areas.

NGAS drilled its first horizontal well in February 2008. Today there are 56 horizontal wells online. "I doubt if our company will ever drill another vertical Devonian shale well on purpose," Daugherty said, noting, "Two more horizontal wells are coming onstream today."

Horizontal drilling is allowing access to drilling targets that would otherwise have been virtually impossible to develop, he said. "There is substantial horizontal drilling upside in the shales here. For three times the money spent, we're getting 8 to 10 times the gas flow. It's really adding to the flexibility of working in the mountains."

Though the cost of drilling these wells is relatively high, NGAS is working to bring costs down.

"When we started in 2008, the cost was US$1.75 million dollars," Daugherty said. Today, well costs are coming in at under $1 million dollars.

The Weir Sand oil and gas prospect is increasing the company's oil exposure. NGAS currently has 78 producing vertical wells and two horizontal wells on its 70,000 acres, and more activity is expected, Daugherty said. "There is significant growth potential."

While NGAS is developing new areas in Appalachia, Canadian Quantum is beginning to drill the Utica shale.

Douglas Brett, president and CEO, Canadian Quantum, believes the region holds real promise. "It's very exciting," he said. Though drilling is now in the early stages, increased activity is just around the corner.

"We are about five years away from having activity like the Marcellus," he said.

The main play in the Utica is between Montreal and Quebec City. This area has a resource potential of 100 to 150 Bcf. In terms of reserves, "it is nothing like the Marcellus," Brett said, "but it's respectable."

Stratigraphically, the play holds promise. The Utica is overlain by the Loraine shale, which according to Brett, could significantly increase both the resource potential and the economics of the play.

For Canadian Quantum as for NGAS, cost per well is still high. Brett believes, however, that this is a short-term problem. "We're getting those costs down," he said.

To date, there have been 10 horizontal wells drilled. "Five have been fraced. Five are waiting," Brett explained. "We're struggling for services. There is not an industry there yet. We're creating one."

Although the creation process is just getting underway, Brett believes development of the Utica is a foregone conclusion.

"We've got infrastructure in the area," he said. "We compare very well with the Marcellus. Our depths are similar. Our thicknesses are similar. The gas in place is there."

With dedication and continued investment, Canadian Quantum is positioning itself to capitalize on the Utica's bounty.

"We're pretty confident that we have a play here, and it's time to start producing some gas," Brett said.