Plains Exploration and Production Company (PXP) held a conference call on May 6, 2010, to discuss the company’s earnings report for the first quarter of 2010. During the call, Plains Exploration and Production Company made comments on some of its operations, including the Haynesville Shale in Louisiana.
Plains Exploration and Production Company has 107,800 net acres under lease in the Haynesville Shale, and an estimated 1400 drilling locations on that acreage. The company has cut back on completions due to higher service costs in combination with low natural gas prices.
“In the Haynesville Shale first quarter average daily production increased 19% to approximately 89 million cubic feet equivalent at to PXP from approximately 75 million cubic feet equivalent per day net during the fourth quarter of 2009. Production is expected to continue to increase to approximately 125 million cubic feet equivalent net per day by year-end 2010.”
“Our inventory at Haynesville wells of non-completed Haynesville wells is doubled from 45 to almost 100…. at the same point in time some of the service companies try to ramp through some service cost increases that cause us to pause some of our completion activities.”
“Respective to the Haynesville and the economics there, the economics are suffering from the standpoint with $7.5 million wells and for $3.94 gas and the light on the liquids is a tough place to do a pro-well economic analysis to feel very good about. What says the Haynesville is every well we’re drilling and each one of those units is really fine at 6 Bcf of gas. You’re going to spend $7.5 million to find 6 Bcf a gas and that’s going to take some more capital to get it out of the ground and drill the other locations and so forth. So for that and versus what lease costs up there, we’re right about break even.”
“So with the amount of activity we’re getting on our Haynesville acreage, we’re going to accomplish all of our goals of having a fantastic gas asset there. I think at a time when gas is going to matter is in 2012.”
Source: Seeking Alpha
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