NEW YORK ( TheStreet) -- Chesapeake Energy ( CHK), Penn Virginia ( PVA), Carrizo Oil & Gas ( CRZO), Consol Energy ( CNX), Rex Energy ( REXX), Gastar Exploration ( GST), ECA Marcellus Trust ( ECT), The Williams ( WMB) and Magnum Hunter Resources ( MHR) are Marcellus stocks with analysts' buy ratings of 88%, as polled by Bloomberg. Based on average 12-month price targets, the above stocks have up to 41% upside potential.

The Marcellus Shale is the largest natural gas shale play in the U.S. and the most attractive target for energy development. Although the formation was recognized as a reservoir rock for several decades, recent high oil prices and drilling technology upgrades rendered the asset economically viable.

The development of Marcellus region between Pennsylvania and West Virginia is under way. Engelder, a geosciences professor at Pennsylvania State University estimates recoverable natural gas reserves in the region at 489 trillion cubic feet (Tcf). The Marcellus is estimated to be the second largest, behind the South Pars field in Qatar and Iran, and the value of recoverable reserves is pegged at around two trillion dollars.

Economic and environmental benefits of natural gas would ensure the development of the Marcellus basin. From about 1,100 wells drilled in West Virginia and Pennsylvania during 2010, the well count is expected to increase to 1,700 by 2020. Given this scenario, Marcellus natural gas production could reach 4 billion cubic feet per day by 2020 compared to 600 million cubic feet during 2009. Besides employment, development of the Marcellus Shale will improve tax collections to local, state and federal governments to around $9 billion by 2020 from $1.7 billion in 2009.

Key factors that could hamper the development of the Marcellus basin are stringent environmental regulations and imposition of severance tax that could challenge future activity in this region.

We have identified 9 Marcellus Shale stocks that received analysts' top buy ratings and hold the potential to deliver attractive returns over the next one year. Analysts' consensus estimate indicates an average return of 16% for the portfolio and the potential to deliver up to 40% upside over the next one year.

9. Chesapeake Energy ( CHK), the second-largest producer of natural gas in the U.S., is focused on discovering and developing conventional and unconventional natural gas and oil fields onshore in the United States. Chesapeake has major stakes in the Barnett, Fayetteville, Haynesville, Marcellus and Bossier natural gas shale wells and other unconventional liquid plays.

Net income for fourth quarter of 2010 was $180 million, compared to a net loss of $530 million in the year-ago quarter. Revenue reported for 2010 fourth quarter was $1.98 billion versus $2.22 million in 2009 fourth quarter.

Since 2000, Chesapeake has built the largest combined inventories of onshore leasehold (13.3 million net acres) by the end of 2010 fourth quarter. Of the total acreage, Marcellus Shale accounts for 13%, or 1.73 million net acres. Net production from Marcellus Shale reserves is 215 million cubic feet equivalent (MMCFE) a day with an operating rig count of 32.

Analysts polled by Bloomberg give the stock 49% buy ratings. In the last one year, the stock has appreciated 42% and is currently trading at 10.6 times its estimated 2011 earnings.

8. Penn Virginia ( PVA) is an independent oil and gas company with presence in various onshore regions include East Texas and Marcellus Shale regions.

The company's proved reserves increased to 942 billion cubic feet equivalent (Bcfe) at the end of 2010 from 935 Bcfe at 2009 end. The proved reserve increases are attributable to core assets in the Haynesville Shale, Selma Chalk, horizontal Cotton Valley and Granite Wash, with decreases in Appalachia and smaller Mid-Continent fields. The company did not disclose any proved reserves for Eagle Ford or Marcellus Shales at the end of 2010 but additions are expected when drilling starts at these wells during 2011.

The management said production for 2010 fourth quarter was in the upper half of the earlier guidance range of 12.4 to 13.4 Bcfe, although lower than third quarter 2010 volumes, primarily attributable to production declines and shifting drilling rigs to the Eagle Ford and Marcellus Shale from the Cotton Valley and Selma Chalk.

Based on consensus estimates, the stock is expected to deliver 20% in a year's time and has 56% analysts' buy ratings.

7. Carrizo Oil & Gas ( CRZO), operating through subsidiaries, is engaged in the exploration, development, exploitation, and production of oil and natural gas in the Barnett Shale in North Texas, the Marcellus Shale in Appalachia, the Niobrara Formation in Colorado, the Eagle Ford Shale in South Texas and in proven onshore trends along the Texas and Louisiana Gulf Coast regions.

Proved reserves estimated for 2010, grew 40% year-over-year to 842 Bcfe, with 671 Bcfe natural gas. Of the proved reserves, 48% are developed. The Marcellus Shale accounts for about 3 Bcfe of reserves. The company added a second development drilling rig in the Marcellus Shale in northeastern Pennsylvania.

The stock is expected to deliver 10% returns in the next one year with analysts' buy ratings of 63%. The stock is trading at 17.6 times its estimated 2011 earnings.

6. Consol Energy ( CNX) is a diversified fuel producer and services provider in the Eastern U.S.

By the end of Dec. 2010, the company's proved gas reserves were 3.7 trillion cubic feet (Tcf), increasing 95% from 1.9 Tcf reported at the end of 2009. Of the 3.7 Tcf proved reserves, 52% are proved developed reserves (PDP) and 48% are classified as proved undeveloped. The proved undeveloped reserves increased 107% in 2010, whereas the PDP increased 86% during the same period.

Regarding Marcellus Shale, J. Brett Harvey, the company's CEO, said, "We saw solid growth in our coal bed methane reserves and a nice jump in our Marcellus Shale PDP bookings from our 2010 program. The reserves from our 2010 Marcellus Shale program averaged 5.5 Bcf per well. When you consider that our laterals averaged 3,400 feet, this means that we booked about 1 Bcf of reserves for every 600 feet of lateral."

The stock rose 24% in the last one year and analysts expect a further upside of 13% in the next one year with buy ratings of 68%. The stock is trading at 12 times its estimated 2011 earnings.

5. Rex Energy ( REXX) is an independent oil and gas company operating in the Illinois, Appalachian and Denver-Julesburg Basins in the United States.

The company has a joint venture agreement with a subsidiary of Sumitomo Corporation to sell and transfer interests in its Marcellus Shale assets located in the Commonwealth of Pennsylvania for $140.4 million. Under the terms of agreement, Sumitomo would pay around $88.4 million in cash. Besides, REXX sold stakes in Butler County area and the Appalachian region for $19 million and $36 million, respectively.

For fourth quarter of 2010, production revenue increased 27% compared to fourth quarter 2009, attributable to a 32% increase in production volume for the same period. Commenting on reserve growth, Dan Churay, CEO, said in a press statement, "We are pleased with our 61% reserve growth at year end 2010 compared to the prior year and the beginning of operations at the Sarsen gas processing plant." Of the total reserves of 201.7 Bcfe, Marcellus Shale accounts for 72%, or 1.46 Bcfe of reserves.

Analysts expect the stock to deliver 41% in the next one year with buy ratings of 73%. The stock is trading at 26.8 times its estimated 2012 earnings.

4. Gastar Exploration ( GST) is an independent U.S.-based company engaged in the exploration, development and production of natural gas and oil. The company is pursuing natural gas exploration in the deep Bossier gas well in the Hilltop area in East Texas and the Marcellus Shale in West Virginia and central and southwestern Pennsylvania.

As on Dec. 31, 2010, the company's total proved reserves stood at 49.9 billion cubic feet (Bcf) of natural gas and 61,300 barrels of oil, or 50.3 (Bcfe), of which 83% were proved developed reserves. Compared to December 2009, total proved reserves amounted to 48.5 Bcf of natural gas and 66,700 barrels of oil, or 49 Bcfe.

In December 2010, the company acquired 61,800 net acres of leasehold in the Marcellus Shale concentrated in Preston, Tucker and Pendleton Counties of West Virginia for $28.9 million. The region accounts for five conventional wells producing around 500 million cubic feet per day of natural gas and the company plans to drill one of the Marcellus wells on this acreage during 2011. As on Dec. 31, 2010, Gastar's proved reserves in the Marcellus Shale region is approximately 2.8 Bcfe, representing 6% of company's total proved reserves.

Analysts expect the stock to deliver an upside of 26% with a buy rating of 80%. The stock is trading at 13 times its estimated 2012 earnings.

3. ECA Marcellus Trust ( ECT) is a trust formed by Energy Corporation of America (ECA) to own royalty interests in 14 producing natural gas wells in Marcellus Shale in Greene County, Pennsylvania. The royalty interest allows the Trust to receive 90% of proceeds from the sale of production of natural gas from ECA's interest in the producing wells.

It has also secured royalty interests in 52 horizontal natural gas development wells to be drilled in the Marcellus Shale held by ECA in Greene County, Pennsylvania. The company currently produces 15 million cubic feet per day from the Marcellus.

Analysts polled by Bloomberg give the stock 80% buy ratings. The stock is trading at 12.8 times its estimated 2012 earnings.

2. The Williams ( WMB) is a natural gas company operating in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania.

The company plans to expand its midstream business in Pennsylvania's Marcellus Shale. Williams recently acquired the midstream assets of Cabot Oil & Gas ( COG) in Susquehanna County for $150 million.

As of Dec. 2010, the company's total proved natural gas and oil reserves stood at 4.5 trillion cubic feet equivalent. Around 94% of total proved reserves are natural gas. Recently, the ratio of PDP grew faster than proved undeveloped reserves. As on date, approximately 59 % of the reserves are PDP and 41% are proved undeveloped.

Analysts expect the stock to deliver 17% in the next one year with buy ratings of 82%. The stock is trading at 22.9 times its estimated 2011 earnings.

1. Magnum Hunter Resources ( MHR) is an independent oil and gas company, active in the Marcellus Shale, Eagle Ford and Williston basin.

The company's 2010 production increased 133% to 597 million barrel oil equivalent (Mboe) from 257 Mboe in 2009. The company expanded its lease acreage positions in Eagle Ford and Marcellus Shale plays. For fiscal 2010, Magnum's net revenue increased to $32 million from $6.8 million in 2009.

Magnum's proposed 2011 fiscal capital expenditure is about $150 million which it plans to deploy for drilling in unconventional resource plays, including the oil leg of the Eagle Ford Shale play and the liquids rich portion of the Marcellus Shale in northwest West Virginia consisting of 12 net wells. Marcellus Shale holds 47,000 net acres, around one-third of its total acreage area.

Analysts expect the stock to deliver 19% in the next one year with buy ratings of 88%. The stock is trading at 19.6 times its estimated 2012 earnings.

>>To see these stocks in action, visit the 9 Marcellus Shale Stocks With Top Buy Ratings portfolio on Stockpickr.

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