The natural gas bears are out of the zoo and running rampant in the marketplace, and stock prices of natural gas producers echo this statement.” This according to Wunderlich Securities analyst Neal Dingmann, reporting sentiments expressed during the recent Independent Petroleum Association of America’s OGIS in New York. Says Dan Pickering of Tudor, Pickering, Holt & Co. Securities Inc., “If we heard oil or ‘liquids rich’ once, we heard it 185 times—and yes, we were counting.”

With per-barrel oil prices hovering in the $80s and gas prices deflated near $4 per thousand cubic feet for the foreseeable future, near-term profits are in the liquids. It’s no surprise that “gas producers look to be getting oilier, quick,” says Subash Chandra, Jefferies & Co. “This year will be known as the year of shale-oil expansion.”

So, gassy producers are packing up capex and funds for acreage acquisitions in search of an oil-focused second home. But such established real estate is limited, with popular locales in the Permian, California and the Bakken booked up. Instead, they are finding opportunities for their shale-gas expertise in underexplored shale oil. Destination: South Texas and the Rockies.

Jefferies & Co.’s Biju Perincheril says, “A shale-oil revolution could be under way.” Already, E&Ps are tripping over each other in a scramble to establish positions.

When Petrohawk Energy Corp. debuted the Eagle Ford shale in South Texas in 2008, it was unveiled as the newest unconventional-gas star on the scene, the heir-in-waiting to the Haynesville and Marcellus plays. But while weak gas prices have tamped down enthusiasm in other unconventional gas plays, the Eagle Ford was blessed with oil and liquids in its backyard, and its retooling as an oil play has producers big and small seeking the wet shale.

When Goodrich Petroleum Corp., a gas-centric Cotton Valley player, entered the oil portion of the Eagle Ford last month with 35,000 net acres, investors loved the move. Chandra says the deal is “a big step in the right direction. It’s a tough time to have 98% of production leveraged to gas.”

Pickering alerts gassy E&Ps to take note of Goodrich’s 3% stock bounce following the announcement. “It shows you exactly where E&P investors’ heads are at.” The company is shifting $50 million of capex out of its Cotton Valley gas hunt and into Eagle Ford oil, and while the overall estimated ultimate recoveries will be lower, “investors hate the gas macro much more than slower growth,” he says.
Goodrich’s deal is in the wake of other recent posturing in the Eagle Ford’s oil window. Carrizo Oil & Gas Inc., Shell Oil and BP Plc have added positions.

Even Petrohawk, which founded the play with its 207,000-acre Hawkville Field in the dry-gas zone, is making its operations more oily with two recent additions to its footprint: 90,000 acres in Zavala County and 53,000 acres in De Witt County. It is moving money and rigs out of its gassy Haynes­ville and Hawkville holdings and into the wetter DeWitt County.

“We’re going to focus in on the high-condensate yield areas in all of these plays, at least until we get higher natural gas prices,” declares president and chief operating officer Dick Stoneburner.
Although further behind the technology curve, the oil-laden cretaceous shales of the Rockies are drawing similar suitors.

At Hart Energy Publishing’s recent Developing Unconventional Gas Conference and Exhibition, Chesapeake Energy Corp. CEO Aubrey McClendon confessed to holding some 700,000 net acres prospective for oil shales in the Rockies and divulged the company’s big oil shift, with an anticipated 700 million barrels of potential in the play.

And at the recent IPAA OGIS in New York, he revealed Chesapeake holds positions in an additional nine unconventional oil-focused plays—including Eagle Ford, Granite Wash, Anadarko and Permian unconventional—with some 1.4 million total acres.

The company is looking to increase its oil production from 8% to 20% of its total, accounting for 50% of its revenues.

Similarly, Noble Energy has bulked up on the wet side of Wattenberg Field in the Denver-Julesburg Basin with a half-billion-dollar purchase of 304,000 acres. Preceding its announced acquisition by Apache Corp., Gulf of Mexico icon Mariner Energy Co. added to its onshore oil foundation with an acquisition targeting the Niobrara, giving Apache a 54,000-acre initial footprint.

Liquids are in fashion and natural gas is “so last season,” confirms Wunderlich’s Dingmann.