Haynesville Shale

Petrohawk Energy Updates Haynesville Shale Operations

Petrohawk Energy (HK) issued an operational update on its activities in the Haynesville Shale. The company participated in 94 wells in the Haynesville Shale during the second quarter of 2010, of which 28 were operated. All the operated wells were completed under restricted production practices.

Petrohawk Energy reported that average daily production from the Haynesville Shale during the second quarter of 2010 was 386 million cubic feet equivalent per day.

Petrohawk Energy is currently drilling the company’s first well in the Haynesville Shale using a modified wellbore design that requires less pressure to conduct hydraulic fracturing operations on the well. The company estimates that if the design is successful, it would reduce well costs by $1 million. This is important because Petrohawk Energy reported a 30% increase in well completion costs since the beginning of 2010.

Petrohawk Energy reduced its rig count in the Haynesville Shale during the second quarter of 2010, and is operating 14 rigs on the play. The company is focused on converting its acreage here from term to held by production.

Plains Exploration and Production Company Comments On Haynesville Shale

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

EXCO Resources Comments On Haynesville Shale

EXCO Resources (XCO) reported earnings for the first quarter of 2010, and held a conference call on May 5, 2010, to discuss the results. During the call the company made comments on some of its operations, including the Haynesville Shale in Louisiana.

EXCO Resources said much of its acreage in the Haynesville Shale is not economical to drill due to the low price of natural gas. The problem is that many operators are drilling to hold acreage rather than for rate of return reasons, and this is keeping the market oversupplied. This is also driving up service costs in the area.

Haynesville Shale Drilling Deferment

“In certain areas of the Haynesville we are seeing right now that with costs up there is only very few areas in the Haynesville that make our 20% hurdle rate…and in fact, we have elected to defer of the drilling in parts of the Haynesville play. We are focusing on DeSoto Parish. Some of those other parts don't give us the economic returns we want, and in turn we are moving out of those areas.”

“At (an initial production rate of) 20 million a day this thing works at $3 gas. If you get down to 10 million a day IP, this is a tough ticket. So we're managing this. We are working very diligently to manage our drilling and completion costs.”

Oil Service Costs

“When you've got Chesapeake, Encana and Petrohawk drilling to hold leases as fast as they are drilling – they have to drill, and they have a lot of demand for services, and it's hurting us. Our costs are up $1 million to $1.5 million a well and gas prices are down 30%. So it's something we're looking at. And I mean we talk about it every day. But I mean it's simple supply and demand right now.”

Haynesville Shale Acreage

“We are looking at approximately another 100,000 acres in the Haynesville, probably 10 different deals. None of which can be assured we are going to get. All of which, if the price is right, we would entertain.”

“If gas stays at $4 or below, they will be a lot bigger. Because what we have seen here over the last, especially six months, with gas cheap I think the big three in the Haynesville with huge acreage positions and drilling commitments pretty much have stopped leasing. So we are seeing a lot of opportunities.”

Source: Seeking Alpha