the u.s. shale oil boom, page-18

Just another example of the importance that TB has a signed contract for the fraccing of Rodney and Earl.

Chesapeake Energy, which has been the most active operator in JVs, said it expects to transact only another two more such deals.

"The window of new concept play discovery is finite," Jeffrey Mobley, the company's senior vice president of investor relations and research, said.

The producer has already announced it is seeking a JV partner for its acreage in the oily Niobrara Shale and expect close a deal late this year or early next year.

Analysts have stated the second play Chesapeake might be looking to partner in is Granite Wash in Oklahoma and Texas.

In addition to the end of new discoveries, future JVs are likely to be harder to complete because of tightening production margins that are mostly the result of steep increases in the cost of drilling services.

Petrohawk Energy CEO Floyd Wilson said the costs of hyrdaulic fracturing alone in the Haynesville Shale went from $1.6 million last year to $3.6 million this year. In the Eagle Ford, Floyd said the cost has tripled from $900,000 a year ago to $3.5 million now.

"Service costs are turning good acreage into less than attractive prospects," said John Bookout, managing director of KKR, the private-equity firm that in June invested $400 million in a JV with Hilcorp Energy's Eagle Ford acreage.

The E&P industry, Bookout said, will have to get creative to attract the kind of capital needed to keep rigs running, looking perhaps instead to institutional investors in the US and abroad.



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