Friday, April 10, 2009

Good Info from Goodrich on Haynesville Play

This week Goodrich Petroleum Corp. made a presentation at a conference and discussed its position in the Haynesville Shale. I thought the presentation (link to whole presentation) offered a good overview on the economics and mechanics of drilling in the Haynesville Play. I’ve copied a few of the slides, especially about the technical details of the drilling and completion phases, but I wanted to point out some highlights:

- The geology and geography of the play is very favorable: the deposit is widely distributed and the shale has good geologic features: little faulting, high pressure, high temperature, naturally occurring porosity, etc. It is also located among existing drilling infrastructure and has access to expanding takeaway infrastructure.

- Goodrich estimates that there are 3.5 million acres in the play and assuming half of it is under a 3-5 year lease scheme that leaves 1.75 million acres that must be drilled or lost. Assuming a 640 acre unit, that implies 2,734 new wells over the next 3-5 years. Right now there are 60 rigs averaging 6 new wells a year. That implies 360 new wells per year, which means that it would take 7.5 years to drill the 1.75 million acres. In other words, the exploration companies are going to need to pick up the pace of drilling because they have a huge incentive to drill and drill quickly.

- It is a very difficult market to drill because capital is so constrained and drilling is very capital intensive.

Bottom line is that while it is very doom and gloom right now, the economics of the Haynesville Play are very appealing (even in this low gas price environment), and the E&P companies need to drill their leases quickly or face losing them starting in the spring of 2012.

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