Haynesville Shale

EXCO Resources To Reduce Haynesville Shale Drilling In 2012

EXCO Resources (XCO) announced a 2012 capital budget totaling $710 million, with $585 million allocated to development and completion activities across the company’s portfolio.  The company’s budget reflects a decrease in spending in the Haynesville Shale relative to 2011.

EXCO Resources plans to spend $453 million to develop the Haynesville Shale in 2012, along with an additional $16 million in lease acquisitions and other operations.  The company will operate 13 rigs in 2012 in the Haynesville Shale.

EXCO Resources said that the reduction in cash flow was done in order to “manage our cash flow in the current natural gas price environment.” The company expects to complete all of its lease obligations during 2012 and convert all its acreage to held by production.  

2012 Highlights

• Operated well count - Drill and complete 98 gross or 30.2 net wells.
• Non operated well count – 22 gross or 0.6 net wells.
• Completion of 22 gross or 7.7 net wells drilled in 2011.
• Holly Area – in DeSoto and Caddo Parish, Louisiana - 8 rigs
• Shelby Trough – Nacogdoches, San Augustine and Shelby Counties, Texas - 5 rigs

In the Shelby Trough area, EXCO Resources will focus drilling in areas where previous wells produced in excess of 30 million cubic feet of natural gas per day during initial periods.

Forest Oil Restarts Haynesville Shale Development

Forest Oil (FST) has reentered the Haynesville Shale and added a rig to this area.  The decision was based on the effectiveness of the restricted rate program that the company used on seven Haynesville wells in 2010. Another factor that motivated the company to deploy a rig here was a reduction in drilling and completion costs over the last year.   

Forest Oil believes that these seven wells will have an estimated ultimate recovery (EUR) that exceeds the 6.5 Bcfe curve. The company has drilled and completed its first Haynesville Shale well here and reported an initial restricted production rate of 12 million cubic feet of natural gas equivalents per day.

Conference Call Comments

“We resumed the Haynesville Shale drilling program based on the success of the restricted rate program combined with decreasing completion costs. Our first well in 2011 was completed for a restricted rate of 12 million cubic feet per day with over 8,600 psi of flowing casing pressure. We increased the number of frac stages on this well to 16. The comparable well that we drilled last year has produced 2.8 Bcf and continues to produce approximately 8 million cubic feet per day over the first 240 days of production.”

“This indicates the EURs from the restricted rate well should be in the order of 8 Bcf or an increase of approximately 25% over our earlier EURs. These results yield economic wells with the rate of return greater than 20% even in today's gas price environment. Further cost reductions will be obtained through pad drilling in 2012, as we have purchased a rig walking system to use with our lantern rigs for this area.”

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