Wednesday, March 18, 2009

Update from Louisiana DNR

The Shreveport Times published an article yesterday with some summary results from the Louisiana Department of Natural Resources. Highlights include a quote from a Petrohawk representative noting that while they are scaling back on capital expenditures in general, the company is spending most of its capex, 70-80%, in the Haynesville Play. This is not new news, but it’s always nice to hear.

Also, “There are 266 wells permitted to drill in the Haynesville Shale. Forty-four of them are active and producing… Of those 44, eight produced from 100 million to more than 700 million cubic feet of natural gas in December.” Petrohawk still has the big winner with a well pumping out 23 MMcfe/day. The article notes that the Haynesville wells pay out rapidly. This allows producers to recoup their investments quickly and reinvest in new wells at a fast pace.

Chesapeake, which has 25 of the 44 producing wells, is looking at companywide capex reductions of 7-10%, but is still committed to spending heavily in the Haynesville Play. It will have 30 rigs operating by the end of this year.

The article makes the point that the enormous volumes these wells produce make them profitable at low natural gas prices, but with continued demand weakness from industrial customers as the result of a slow economy, demand will continue to lag and prices will stay low.

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