In Hunt for Shale Oil, Early Results Need to Be Massaged

NEW YORK ( TheStreet) -- Initial results are in from drilling in Ohio's Utica shale region, and the results show that the boom assumed for one of the U.S. shale hopefuls is still far from certain.

The state of Ohio tried to put a positive spin on what it's hoping will be a budding economic juggernaut for its drilling industry. Chesapeake Energy ( CHK), a pioneer in the Utica, has been talking up the shale play for years.

The actual results, though, were described by analysts in a less optimistic tone. There's still a lot of work left to do before Wall Street will be convinced that the Utica will pay off where it counts the most, in its production mix of natural gas liquids and oil.

The state of Ohio release was the first set of annual results from the Utica shale, nine wells in all, all of which are owned by Chesapeake Energy. Chesapeake has a joint venture with Total ( TOT) in the Utica shale, announced at the beginning of 2012.

Chesapeake Energy is engaged in a significant shift from the dry gas basins to the liquids rich shale plays amid historic lows in natural gas pricing, making success in the shale plays critical.

The Ohio results show wells that are not producing oil at a rate that would impress, and a mix of production that may be too tilted to natural gas.

Analysts consulted on the initial Utica results said the data was "underwhelming" when considered in a vacuum. However, given that it's still early days in the Utica and these are the first wells, the results are likely to be neutral as far as the market outlook on Chesapeake Energy.

"Maybe between overwhelming and underwhelming, or 'whelming,' would be the right way to put it," quipped one Chesapeake Energy stock analyst, Tim Rezvan at Sterne Agee. In the least, the Utica results were the most anticipated set of shale drilling results so far in 2012.

Chesapeake shares were up 0.6% on Monday, slightly trailing the energy sector rally, up close to 1%. Gulfport Energy ( GPOR), which has acreage close to Chesapeake's in the Utica, was up by 0.3%, also short of the energy sector return on Monday.

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