Thursday, May 7, 2009

XTO: Update from Earnings Call

XTO Energy reported earnings this week and gave an update on its progress in the Haynesville Shale. XTO is not a major player in the Haynesville Play, but the company is a big dog in the domestic natural gas industry.

XTO currently has four wells drilling in the Haynesville Shale, up from two. The company has been drilling mostly in Panola County, TX but is moving into Louisiana next month. They have two producing wells, the latest averaging 5.5 MMcfe/day. Four wells are awaiting completion and more information on at least a couple of them should be known next month.

Like other companies, XTO is choking back its Haynesville wells once they start producing. Once gas prices improve, look for them to open the spigot. Management indicated that the choking back should improve the production decline curves for the wells. The company also indicated that it is working on adding to its takeaway capability in the region so it can "run hard" next year. This last statement indicates to me that the company subscribes to the common belief that natural gas prices will recover in 2010. XTO is setting itself up as the crouching tiger by building capacity and drilling wells but holding back until prices improve.

XTO also mentioned a little about well costs. The existing wells have cost between $8 and $9 million, but a recent well came in at $7.5 million. They hope to get costs down to $6.5 million this year.

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