Wednesday, May 13, 2009

EnCana/Shell Looking to Offload Acreage

I've been mulling over an article I read last week in the Calgary Herald. It says that EnCana (which is in a 50/50 joint venture with Shell in the Haynesville Shale) is "taking bids for as much as a 50 percent interest" in approximately 130,000 of its 435,000 acres in the Haynesville Play. I was surprised by this, especially since the company recently announced that it has increased its focus and capital spending in the Haynesville Shale.

But then I looked closer and read that the acreage is in the southern part of the Louisiana side of the play, specifically in Sabine and Natchitoches Parishes. From all evidence to date, it looks like those areas are not in the heart of the play and are definitely outside the "de-risked" boundary (at least as defined by GMX Resources).

I'm not accusing them of offloading a sucker play, but I imagine they are looking for a company that missed its opportunity to play in the Great Haynesville Land Rush and is looking for an easy in. Letting another company take the drilling risk in this area frees EnCana/Shell to focus on the acreage that has the highest probability for payoff. Since most leases have a "use it or lose it" feature, a.k.a. "held by production," if EnCana/Shell doesn't drill and produce on the land they will have to turn the keys back within three to five years (probably now two to four years). It's better to get a smaller piece of a bigger pie than to have to throw the pie away because you didn't have time to eat it. Or something like that.

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