Tuesday, December 15, 2009

El Paso: Update on Nitty Gritty

Outside of the questions of business strategy, El Paso had good news to report on the production side at its recent analyst meeting.  The company controls approximately 40,000 net acres, mostly in north Louisiana with 17 operating wells and prospects for 269 more, based on 160 acre spacing.  El Paso's 2010 capital expenditure in the Haynesville region is $248 million (of $1.1 billion total E&P capex budget), which should yield approximately 41 gross wells.  The company has five rigs working at this time.

Its best results have been in the Holly Field in DeSoto Parish, where it is estimating ultimate recoveries of 6.5 to 7.5 Bcfe.  Elsewhere in its Haynesville properties, EURs run between 5 and 6 Bcfe.  El Paso estimates that it's Haynesville breakeven commodity price (with a 12% internal rate of return) is around $3.90/Mcf.





The company has been successful in its efforts to gain efficiencies through successful cost and time reductions.  Average well cost for Q3 2009 was $7.4 million, even as it has expanded its well completion techniques.  The company now uses 14 completion stages for most wells, with laterals greater than 4,000 feet.  Flow rate has increased from 40 bpm to 80 bpm, fluid has increased from 10 to 15 MBbl per stage and proppant has increased from 250,000 to 380,000 pounds per stage. 

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