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