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Cracking the Code: Is the Monterey Shale the Next Big Boom or Bust?


California’s Monterey Shale could turn out to be one of the largest oil producing shales in the world. In fact, some experts believe it could hold more oil than the entire Bakken Shale. The Monterey Shale covers large concentrations of acreage in the San Joaquin, Los Angeles and Monterey Basins. Much like the Bakken Shale, the Monterey Shale is primarily oily throughout.

Setting Boundaries

In order to effectively outline the area discussed herein, we will limit the region to just the San Joaquin Basin (specifically, the region from Bakersfield heading North up to Modesto). The shale is thicker in the Southern Portion (over 400 feet thick in Kern County) and gradually reduces to thickness of around 150 feet in Stanislaus County. The shale is the source rock for the prolific oil fields throughout the region. Even within this region, the geological formations are diverse in makeup. An interesting point about the Monterey Shale is that geologists and engineers contend (with some controversy) that vertical wells might be as effective at extracting the oil as the horizontal hydraulically fracked wells which are common in most North American Shale Plays.

There has been a significant amount of leasing activity throughout the Southern Portion of the play. Kern, Kings and Fresno are by far the most actively leased counties. The most prolific Lessees in the region are as follows:


  • Aera Energy, Inc. – 10,000 acres
  • Maverick – 10,000 acres
  • Onshore Exploration Corp. – 40,000 acres
  • Venoco – 100,000 acres
  • OXY – 40,000 acres
  • Western Energy Production – 125,000 acres


  • Zodiac Energy – 90,000 acres
  • Western Energy Production – 100,000 acres
  • Venoco – 40,000 acres
  • Onshore Production – 10,000 acres
  • Lonetree Energy – 15,000 acres
  • Hess – 15,000 acres


  • Maverick – 45,000 acres
  • Venoco Inc. – 40,000 acres
  • Onshore Exploration Corp. – 20,000 acres
  • West Coast Land Service – 10,000 acres
  • Western Energy Production – 10,000 acres

Drilling Down

Many areas of the Southern Region are currently held by production (HBP). By far OXY is the largest acreage holder in the region with over 1.1 million acres, followed by Aera (controls over 25% of all oil production in CA) and ChevronTexaco. According to company press releases, Venoco controls just over 50,000 acres in the tri-county region.

Despite the large amounts of leasing activity, there has been very little drilling into recently leased acreage. In fact, over 95% of all wells drilled in the region during the past three years have just offset or in-filled existing production. Similarly, the vast majority of permits in the region cover acreage where existing production has been present.

Drillinginfo map of Kings and Fresno County. Leased acreage is shown in purple and active permits are blue. Most of the permits are on currently producing leases.

Geologist and Engineers still have not “cracked the code” for Monterey Shale Production. Therefore, the economics of the play are inconclusive. While some exploratory wells have been drilled, the really significant activity required to truly understand drilling and producing the Monterey Shale has not yet occurred. Most exploration companies with an active presence in the region expect to increase exploratory drilling throughout the shale during 2013 (Aera, OXY, and Venoco all plan to drill over 10 Monterey Shale wells). 2013 should be a pivotal years for the Monterey Shale. Most of the “core” acreage has been leased and is waiting to be drilled.

So, will the Monterey Shale be the next Bakken or the next bust? Only time will tell.

Now it’s your turn. Do you think is the Monterey Shale will turn into the next Bakken? Please, leave a comment below.

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