Wednesday, April 1, 2009

Southern Star's Third Haynesville Well

Southern Star Energy released initial results from its third successful Haynesville Shale well. The well, Boyce-Pate 16-1 in the Sentell Field in Bossier Parish, encountered both Cotton Valley and Haynesville pay. From the company's release:

"This well successfully encountered its Cotton Valley target, logging 66 feet of net gas pay in the Davis Sand intervals before the Company drilled ahead to further evaluate the well's Haynesville potential. The Boyce-Pate 16-1 Well reached a total depth of 11,200 feet on March 21, 2009. This is the third well in the Company's Haynesville development program, and the last of three Haynesville Shale vertical test wells in the Sentell Field planned this year.

"Wireline logging and mud log shows indicate the Boyce-Pate 16-1 Well encountered 177 feet of net porous Haynesville Shale over a gross interval of 395 feet. The pay interval calculated average porosity of 10% with water saturation averaging 12%. Mud logs indicated gas shows throughout the interval, ranging from 1100 - 5900 units. "

In its March investor presentation, Southern Star provided some interesting information about Haynesville Play well economics (slide below). It costs $8 million to drill a well (although the model is built around a scenario where Southern Star has a 40% working interest) and the payback in 1.2 years, using relatively conservative assumptions, including the decline curve, which is depicted graphically below. They calculate breakeven for the well at natural gas priced at $2.91, still 75 cents below where it sits today.

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