Friday, December 31, 2010

Haynesville Shale Rig Count: -3 to 158

The weekly Haynesville Shale rig count dropped three to 158 this week with a four rig decrease in Texas to 43 and a one rig increase in Louisiana to 115.



Thursday, December 30, 2010

U.S. Rig Count: -20 to 1,694

The weekly Baker Hughes rig count showed a 20 rig decrease in the U.S., dropping to 1,694.  Gas rigs dropped 12 to 919, oil rigs decreased by six to 765 and miscellaneous rigs were down two to 10.  By type, horizontal rigs were down 12, vertical rigs down 11 and directional rigs up three.

In the Haynesville region, inclusive of other formations, the rig count decreased by three to 179.  The count was up two in N. Louisiana to 123 and down five in east Texas to 56.

The detailed Haynesville Shale rig count should be available Friday, as I am on the road today and can't work on it until tonight.

EIA: Storage -136 Bcf to 3.232 Tcf

The weekly EIA working gas in storage report showed a 136 Bcf decline to 3.232 Tcf.  The weekly net withdrawal was slightly greater than last year's (-130 Bcf) and the five year average (-118 Bcf).  The current storage level is 62 Bcf below (-1.9%) last year's level but 246 Bcf higher (+8.2%) than the five year average.

Wednesday, December 29, 2010

2010 Haynesville Shale Top 10 List

It has become a tradition in all media to roll out a year-end top 10 list of big stories for the past year.  As much as I try to eschew other people’s traditions, I find it to be a worthy exercise to look back at the year to try to discern larger trends.  I’ve tried to do that below with a focus on the stories and trends that impacted the Haynesville Shale to the greatest degree.  While the news around the play hasn’t been all that great this year, there is some good news in the larger trends.

10. Restricted choke size practice gains traction.  The practice of flowing wells with lower choke sizes (i.e. 14 or 16/64” vs. 22 or 24/64”) has taken hold for some operators, most notably Petrohawk, which is using the technique on nearly every new well now.  The theory is that narrower chokes will lead to less steep decline rates and better overall gas recoveries from the formation.  Proponents say that the cumulative recoveries with lower flow rates actually catch up with “normal” wells in +/- seven months because of the improved decline curve.

9. CNG continues to make progress.  Compressed natural gas is slowly making inroads throughout the country as fleets are slowly adding NG vehicles and subsequently CNG fueling infrastructure.  I’m not sure which is the chicken and which is the egg, but progress towards natural gas vehicles is real, albeit slow.

Petrohawk's Yard Sale Continues: Fayetteville Position Sold

Over the past year, Petrohawk Energy has been selling nearly all of its "non-core" assets and, with the sale of half its Haynesville gathering pipeline, some relatively key assets. Last week, the company disclosed that it has agreed to sell its Fayetteville Shale assets to Exxon/XTO Energy  for $650 million.

We've reported a number of similar sales over the past year.  The goal of these sales is two-fold:  one, to allow the company to focus on its key assets, the Haynesville and Eagle Ford Shales; and two, to fund capital expenditures to drill in these plays without borrowing money or diluting shareholders.  The strategy makes some sense if you can buy low/sell high, but it can be like giving money to a junkie if management has a history of overspending on projects that do not yield sufficient future cash flow.  I'm not saying that is the case, but asset sales can be dangerous for a company because it is risky to sell future cash flow that would have supported existing operations and debt.

In the case of the Fayetteville Shale, Petrohawk operated one rig in 2010 but planned to drop it in 2011.  The company was to participate in 311 non-operated wells, which were expected to consume $100 million of 2011 capex.

Tuesday, December 28, 2010

New Texas Completions/Permits

Completions:
  • Atkinson Unit #1H, EOG Resources: 15.185 MMcf/day IP, 26/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: CHIRINO, JA, A-17
  • Cameron Minerals SU #1H, Exco Operating: 23.857 MMcf/day IP, 22/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: CHIRINO, JA, A-17
  • Lauren Alston #1H, EOG Resources: 13.776 MMcf/day IP, 22/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: MORA, JM, A-827
  • Rambin Gas Unit #1H, Devon Energy: 4.2 MMcf/day IP, Adj./64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: ZANOBRANO, AF, A-631
  • Sutton Unit #1H, EOG Resources: 22.155 MMcf/day IP, 25/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: CHIRINO, JA, A-17

Friday, December 24, 2010

Merry Christmas!

Christmas is my favorite time of year.  As I've grown older, I've become stoic about most holidays, but not Christmas.  I've long said that I can listen to Christmas music all year 'round (although the chestnuts stop roasting on the open fire around 8 p.m on the 25th).  Maybe it is just the warm memories of my youth.  My parents made Christmas special for my sister and me and I have very strong memories from nearly every past Christmas.  

Fast forward to today.  I now have two little ones and I am keen on creating those same good memories in them.  But dealing with the various stresses of Christmas - shopping, wrapping, cooking, traffic, holiday guests, etc. - I can understand why some people just aren't as fond of the season as I am.  The holiday noise level has escalated big time over the past several years.  Selfishly, I keep wanting to stop and shout, "what about me!?!" (Fortunately, I've learned to keep my mouth shut at those times.)

But what I've come to realize is that these holidays are what you make of them.  Everyone has a different set of traditions and it is important that we respect these differences in celebrating our own.  To that end, I wish you all a Merry Christmas - in whatever form it may take.  

And no Christmas is complete without a smile:

Thursday, December 23, 2010

A Few New Louisiana Completions

  • EMW 20 H #1, Petrohawk Operating: 7.569 MMcf/day IP on 14/64 in. choke at 7,911 psi; Caspiana Field, Caddo Parish, S20/T15/R12; res. A, serial #240761
  • Edgar Cason 33 H #1, EnCana Oil & Gas: 9.522 MMcf/day IP on 21/64 in. choke at 6,095 psi; Bracky Branch Field, Red River Parish, S33/T14/R9; res. A, serial #241181
  • Lowrey Inv Co. #1-ALT, EXCO Operating: 11.404 MMcf/day IP on 18/64 in. choke at 7,511 psi; Caspiana Field, DeSoto Parish, S19/T14/R12; res. A, serial #241096
  • Moran 28 #4-ALT, EXCO Operating: 10.59 MMcf/day IP on 16/64 in. choke at 7,608 psi; Holly Field, DeSoto Parish, S21/T14/R13; res. A, serial #241049

EIA: Storage -184 Bcf to 3.368 Tcf

The weekly EIA working gas in storage report showed a 184 Bcf decrease, bringing the storage level down to 3.368 Tcf.  The EIA also announced that last week's storage level was misstated on the high end and was revised to be 9 Bcf lower.  The current stats reflect the revision.  The weekly withdrawal was higher than last year (-172 Bcf) and the five year average (-136 Bcf).  Current levels are 1.6% below last year's record level and 8.5% above the five year average.

Wednesday, December 22, 2010

Haynesville Shale Rig Count: +2 to 161

The weekly Haynesville Shale rig count increased by two working rigs for the second straight week, ending at 161.  Louisiana held firm at 114 while Texas added two rigs to 47.



The count is up five rigs from its recent trough in mid-November at 156 rigs.

GMX Reduces 2011 Capex for Third Time

GMX Resources announced that it has reduced its 2011 capital budget to $110 million.  This is the third time that the company has reduced its planned capex, from $200 million to $175 million to $152 million and now to $110 million.  For reference, GMX expects 2010 capex to come in at between $195 and $200 million.  The company plans to operate only one rig in 2011.  If market conditions improve, the company may add another rig mid-year, which would increase capex by $40 million.

The capex reduction occurred simultaneously with a redetermination of the company's borrowing base, which set GMX's borrowing limit at $130 million (of a $250 million facility).  GMX, like many other companies that depend on debt to fund growth, constantly has to watch its borrowing base, especially when operations don't generate strong cash flows because of low commodity prices.  The capital budget presumably will be funded by a recent preferred stock offering, debt and excess cash flow.

The company also announced results from some recent completions that I have yet to note:

  • Mia Austin #6H, GMX Resources:  7.891 MMcf/day IP (30 days); Carthage Field (Haynesville Shale), Harrison Co., Survey: WILLIAMS, W, A-757 
  •  Blocker Ware #8H, GMX Resources:  5.724 MMcf/day IP (60 days); North Carthage Field (Bossier Shale), Harrison Co., Survey: WILLIAMS, W, A-757

U.S. Rig Count: +5 to 1,714

The weekly Baker Hughes rig count showed a five rig increase in the U.S., bringing the count up to 1,714.  Oil rigs increased by 15 to 771, the largest number of oil-based rigs since at least 1987 (I'm too lazy to research before '87), while gas rigs decreased by 10 to 931.  Miscellaneous rigs held at 12.  By type, vertical rigs were up 11 and horizontal rigs were up five, while directional rigs were down 11.

In the Haynesville Shale region, inclusive of other formations, the rig count was down by two to 182.  There was one new rig working in east Texas (61) and three fewer in north Louisiana (121).

The detailed Haynesville Shale rig count should be available late this afternoon or tomorrow.

SM Energy 2011 Capital Budget

SM Energy, formerly St. Mary Land & Exploration, announced today that it will spend $1.08 billion on capital expenditures in 2011.  Of that total, $830 million will be spent on drilling.  The company will focus on the Eagle Ford Shale (60% of drilling budget) and Bakken Shale (20%) next year.  Only 4% of the drilling budget, or $35 million, will be spent on the Haynesville Shale. That budget will allow SM to drill five gross operated wells and participate in 20 gross (2 net) wells.

Buuuuuuut...SM's Haynesville budget does not provide enough funding to enough to hold the company's 22,000 net Haynesville acres.  Here's what they say:

"SM Energy is currently exploring a number of options for its operated Haynesville shale acreage position in East Texas which would allow the Company to drill enough wells in 2011 and early 2012 to hold its existing acreage while minimizing the amount of capital deployed. Twelve (12) gross wells in 2011 in addition to the operated wells discussed above and eight (8) gross wells in 2012 would need to be drilled to hold the Company's acreage position." 
Stay tuned for a deal.

Tuesday, December 21, 2010

Louisiana Lease Auction Results

The Louisiana Mineral Board held a relatively uneventful monthly lease auction last week - uneventful, at least, from the perspective of the Haynesville Shale.  Only 85 acres were leased in the sale, half in Sabine Parish, half in Bienville Parish.  Two of the smaller parcels were in sections that are not currently subject to a unit but are nearby other units.  A few larger lease parcels in Caddo and DeSoto did not receive bids and two of the other parcels in Sabine (S25,30/T9/R10,11 and S28/T9/R11) were held back because the winning bids ($3,500/acre bonus) were rejected as insufficient.

The average bonus was $5,452, but the weighted average was $6,788, as shown below.  All of the winning bids

New Texas Completions

Completions:
  • Teutsch #1 (vert.), Valence Operating: .672 MMcf/day IP, 12/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: CHIRINO, J A, A-17
  • Miles Bell #1 H, Chesapeake Operating: 5.15 MMcf/day IP, 18/64" choke; Carthage Field (Haynesville Shale), Panola Co., Survey: PREFSLY, W A, A-556
  • Wiener Estate C #2 (vert.), Classic Operating: .032 MMcf/day IP, 48/64" choke; Carthage Field (Haynesville Shale), Panola Co., Survey: MARY POTTS, A-867
  • Williams-Chumley #1 H, Devon Energy: 5.4 MMcf/day IP, Adj./64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: SUBLETT, PA, A-44
  • Zap DU #1 (vert.), Exxon/XTO Energy: .104 MMcf/day IP, 48/64" choke; Carthage Field (Haynesville Shale), Shelby Co., Survey: LEWELLYN, T, A-447

Goodrich 2011 Capital Budget

Goodrich Petroleum announced its 2011 capital budget last week.  The company will spend $225 million in total, a reduction of $30 million from 2010.  Goodrich does not expect to have to borrow to fund the plan, as the funds will be sourced from cash flow and $70 million of expected "non-core asset" divestiture proceeds (although I tend to view asset sales sort of like mortgaging the future).

Goodrich will spend $90 million to develop the Haynesville Shale next year, $60 million in the Shelby Trough in Texas and $30 million in north Louisiana.  The company also expects to spend $22 million across its platform on leasehold acquisitions and infrastructure, but I don't suspect that much of that money will be spent in the Haynesville area, as Goodrich is intent on advancing its currently less well developed Eagle Ford Shale prospects.

Monday, December 20, 2010

Glorifying Coal...AT THE MALL!!!

Going in, I had very low expectations for a trip to the shopping mall several days before Christmas, but at least I knew my son and I could spend an hour watching the model railroad trains set up in the atrium.  This year, I was horrified to see an underlying coal theme in the train vignettes!  Yep, that's a coal train chugging along below.


A big train tugged coal cars around the snowy mountain and there were several large piles of coal on the snow, including one next to a house.  The only thing missing were mountains with their peaks sheared off, slag heaps and tailings ponds.

Saturday, December 18, 2010

Icahn in the House!

News came yesterday that Carl Icahn increased his ownership of Chesapeake Energy from 2.5% to 5.8% and now "seeks talks" with the company.  Icahn is best remembered as a corporate raider from past decades who now plays the euphemistic role of "activist investor," aiming to buy into undervalued companies and "maximize shareholder value."

Pardon the "excess quotation marks" above, but activist investors can be a mixed bag and I tend to view them with one eyebrow raised because they can sometimes cause a company to make short-sighted decisions that help the investor make a quick profit but don't always benefit the long-term holders of the company.

One thing is for certain, Icahn will not be a passive investor.  Likely more of a burr under the saddle, in fact.  Interestingly, Icahn agreed last week to buy utility Dynegy, a company that uses lots of gas (and a bunch of coal too) but has been burned (pun unintended) by low gas prices of late.  Interesting coincidence?

Friday, December 17, 2010

Haynesville Shale Rig Count: +2 to 159

The weekly Haynesville Shale rig count showed a two rig net increase in the play, rising by three rigs in Louisiana (114) and falling by one in Texas (45).  Both moves reverse (at least temporarily) recent trends in each state.



U.S. Rig Count: -14 to 1,709

The weekly Baker Hughes rig count showed a 14 rig decrease to 1,709 working rigs in the U.S. The number of oil rigs (756) and gas rigs (941) both decreased by seven, while the number of miscellaneous rigs (12) was unchanged.  By type, horizontal rigs were down 12, directional rigs were down five and vertical rigs were up three.

In the Haynesville region, exclusive of other formations, the rig count increased by five to 184.  North Louisiana (124) gained five rigs, while east Texas (60) was unchanged.

The detailed Haynesville Shale count will be completed later this afternoon.

Thursday, December 16, 2010

But Will it Make the Earth Fat?

The Wall Street Journal reported yesterday that the big purveyors of hydraulic fracturing fluid are introducing frac fluid with more benign ingredients.  Halliburton has introduced CleanStim, Baker Hughes has launched BJ SmartCare and Flotek Industries has a product made from citrus products.  Halliburton says its product will be more expensive than regular frac fluid until companies start buying it in greater quantities (or, realistically, until customers start buying environmentally friendly frac fluid from the company's competitors).

The chemicals involved in the new formulations include the above mentioned citrus products, mineral oil, maltodextrin and organic ester, among many others.  A Halliburton spokesman said, "The same components to make this stuff are used to make ice cream and beer."  Mmmm, beer.

A representative of the Environmental Working Group sounded unimpressed with the new formulations, saying that he was actually more concerned that fracking could allow natural gas condensates to penetrate aquifers.  Funny, I thought the "poisonous" fluid was the big issue.  Sounds like the EWG spokesman now needs a refresher in basic physics.  I was more concerned that he was going to be outraged that adding ingredients used in processed foods to frac fluid would make the earth fat.

Even MORE (20) Louisiana Completions

Maps and spreadsheets have been updated.  I've also updated the completions post from earlier this week with some missing data.
  • Woolley 8-16-15 H #1, Chesapeake Operating: 12.192 MMcf/day IP on 22/64 in. choke at 5,522 psi; Johnson Branch Field, Caddo Parish, S8/T16/R15; res. A, serial #241060
  • Shadoin 14-10-13 H #1, Chesapeake Operating: 12.62 MMcf/day IP on 22/64 in. choke at 7,040 psi; Benson Field, DeSoto Parish, S14/T10/R13; res. A, serial #240678
  • Harris 19 #1, SWEPI, LP: 3.999 MMcf/day IP on 22/64 in. choke at 5,221 psi; Trenton Field, DeSoto Parish, S19/T11/R12; res. Jur-A, serial #237373
  • NPLLC 13-12-14 H #1, Chesapeake Operating: 16.384 MMcf/day IP on 22/64 in. choke at 7,440 psi; Red River-Bull Bayou Field, DeSoto Parish, S13/T12/R13; res. A, serial #240808

Comstock's 2011 Capital Budget

Comstock Resources today announced its 2011 capital budget of $522 million for drilling and exploration that will be split between the Haynesville Shale and the Eagle Ford Shale.  The company plans to drill 45 gross wells (27.5 net) in the Haynesville Shale this year and spend $110.2 million of the $522 million budget to pay a dedicated completions crew to complete the company's inventory of 25 Haynesville wells (21.6 net) drilled but not completed in 2010.

The company currently operates six rigs, including five in the Haynesville Play.  It will drop one of the rigs (presumably in the Haynesville) in the first quarter of 2011 and move one of the Haynesville rigs to the Eagle Ford mid-year.  (Comstock plans to drill 22 wells in the Eagle Ford in 2011.)  The implication is that by the third quarter Comstock will only operate three rigs in the Haynesville Shale as the company shifts its attention to the liquids-rich Eagle Ford.

EIA: Storage -164 Bcf to 3.561 Tcf

The weekly EIA working gas in storage report showed a 167 Bcf net withdrawal, bringing the gas in storage level to 3.561 Tcf.  The weekly withdrawal falls between last year's (-186 Bcf) and the five year average (-153 Bcf).  The current storage level is 35 Bcf lower than last year's (record high) level but 321 above the five year average.


Temperatures across the country were 5.3 degrees below normal and 1.6 degrees below this week last year, with the largest negative variance reported in the South Atlantic region, where the average temperature was 12.1 degrees below normal, yielding 53.4% more heating degree days than normal.  

Monday, December 13, 2010

New Louisiana Completions

[Re-posted 12/16/10 to fill in some missing information.]
  • Mayfield 9 #1, Samson Contour Energy: 9.538 MMcf/day IP on 20/64 in. choke at 6,000 psi; Greenwood-Waskom Field, Caddo Parish, S9/T17/R15; res. A, serial #241542
  • McDade 8 #4, J-W Operating: 8 MMcf/day IP on 18/64 in. choke at 4,200 psi; Elm Grove Field, Bossier Parish, S8/T16/R12; res. A, serial #241440
  • A R Collins 18 H #1, XTO Energy: 0.422 MMcf/day IP on 16/64 in. choke at 1,140 psi; Lake Bisteneau Field, Bienville Parish, S18/T16/R9; res. A, serial #240772
  • Nabors 10 H #2, Chesapeake Operating: 14.786 MMcf/day IP on 22/64 in. choke at 7,430 psi; Red River-Bull Bayou Field, DeSoto Parish, S10/T12/R12; res. non-unitized, serial #239997

Winter is Finally Here

If there was any doubt that winter weather would come, yesterday's video of the Minneapolis Metrodome's roof collapsing under the weight of snow should make everyone forget about a warm autumn.



With the first big cold snap of the year, the price of natural gas at the New York Citygate more than doubled in one session, jumping $6.32 to $12.31/MMBtu.  The spot price at Henry Hub increased 4.2% to $4.52/MMBtu, the highest price since August 9.  The price is still 19.4% lower than this week last year, but at least it finally is headed in the right direction.<a href="http://msn.foxsports.com/video?vid=ca15cffb-3b66-49a0-84ca-20ed0a175567" target="_new" title="">NFL on FOX: Metrodome collapse</a>

New Texas Completions

Completions:
  • Crump Gas Unit #1 H, Chesapeake Operating: 5.15 MMcf/day IP, 18/64" choke; North Carthage Field (Bossier Shale), Panola Co., Survey: PREFSLY, W A, A-556
  • Glaspie Gas Unit #1 H, Devon Energy: 5.41 MMcf/day IP, Adj./64" choke; Carthage Field (Haynesville Shale), Rusk Co., Survey: MARTIN, D, A-526
  • Dunaway Gas Unit #1 H, Chesapeake Operating: 3.842 MMcf/day IP, 16/64" choke; Carthage Field (Haynesville Shale), Panola Co., Survey: GILLASPY, G A, A-223

Developmental Activity:
  • J. Risinger GU #1, Southwestern Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: ROWE, J , A-585
  • Bosh-Heisman (Allocation) #17 H, GMX Resources; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: EARL, D, A-235

A Partner or a Fly in the Ointment for EXCO

News came this morning that billionaire Wilbur Ross has accumulated 15.9 million shares, or a 7.5% stake, in EXCO Resources through various entities he controls.  He made the vast majority of the purchases in November and December at prices +/- $18.50 per share.

This comes amid management's attempted buyout of the company.  Ross says that his actions are the result of his belief that natural gas prices will rise, but given the timing, one wonders if a little merger arbitrage isn't on his mind as well.

How this impacts the proposed buyout is unknown at this point.

Friday, December 10, 2010

Haynesville Shale Rig Count: -1 to 157

The Haynesville Shale rig count continued to decline this week, dropping by two rigs to 157.  The count increased by one in Texas to 46 and dropped by two in Louisiana to 111.  This change echoed the recent pattern where the net rig count has decreased but the decline is mostly felt in Louisiana, while Texas is seeing a small increase in rigs.  Looking back a couple of months to October 1, the Haynesville Shale rig count has decreased by 11 rigs.  Louisiana dropped 14 rigs, while Texas added three rigs.  The table below shows the change.  It' s not dramatic, but it is an interesting trend.


The charts for each state are below.  Note that Sun River Operating, which is working a farm-out from Devon, is drilling its first rig in Panola County, TX.


U.S. Rig Count: +10 to 1,723

The Baker Hughes U.S. working rig count continues to climb, increasing by ten this week to 1,723.  Oil rigs were up 21 to 763, their highest level since at least 1987 when my data starts.  Gas rigs were down 13 to 948, and miscellaneous rigs were up by two to 12.  By type, directional rigs were up by seven and vertical rigs were up by three, while horizontal rigs were unchanged.

In the Haynesville Shale region, inclusive of other formations, the rig count dropped by five to 179, its lowest level since December 18, 2009.  Rigs in north Louisiana decreased by four to 119 and rigs in east Texas decreased by one to 60.

The detailed Haynesville Shale rig count should be available later this afternoon.

Thursday, December 9, 2010

Fiat + Chrysler = U.S. NatGas Vehicle

Chrysler Group, LLC, with its partner Fiat Group, announced earlier this week that the company will focus on developing a consumer natural gas vehicle for the U.S. market.  This decision contrasts those of Nissan and GM, which have developed plug-in electric vehicles, the Leaf and Volt, respectively.

There is little information as to what specific types of vehicles Chrysler might make, but the company has indicated that it understands that fleet vehicles will be a better match for the U.S. market right now.  Because Fiat is one of largest makers of light duty natural gas passenger vehicles in the world, it is not a huge surprise that Chrysler is talking natural gas instead of plug-in electric.  Ultimately I expect to see Chrysler make natural gas passenger vehicles for the U.S. market.

I think this is a very smart move.  Natural gas vehicles will be cheaper than plug-in electrics and will ultimately be cleaner to use.  They generally have a longer range and can be fueled faster.  They are also not dependent on batteries.  Electric cars sound great, but when you have to plug into a grid fueled by COAL, you are worsening pollution and CO2 output, not improving it.

Recent Louisiana Completions

  • Pace 5 H #1, Chesapeake Operating: 14.04 MMcf/day IP on 22/64 in. choke at 6,800 psi; Bethany Longstreet Field, Caddo Parish, S5/T14/R16; res. A, serial #240755
  • Tensas Delta Expl Co LLC 7 H #1, Petrohawk Operating: 5.368 MMcf/day IP on 12/64 in. choke at 7,677 psi; Cedar Grove Field, Caddo Parish, S18/T16/R13; res. A, serial #241555
  • Jackson Davis 26 H #3, EnCana Oil & Gas: 19.99 MMcf/day IP on 24/64 in. choke at 7,140 psi; Caspiana Field, DeSoto Parish, S26/T15/R14; res. A, serial #241290
  • CSJ Minerals LLC 1 #1, SWEPI, LP: 18.524 MMcf/day IP on 24/64 in. choke at 8,767 psi; Red River-Bull Bayou Field, DeSoto Parish, S1/T12/R13; res. C, serial #240230

Crimson Mid-Bossier Update

Crimson Exploration provided an update on its Mid-Bossier wells in the Shelby Trough area of east Texas with a new completion:
  • Gobi #1, Crimson Exploration: 11.7 MMcf/day IP, 16/64" choke; Carthage Field, San Augustine Co., Survey: CONICHE, S , A-9
Gobi had a 4,400 foot lateral with 14 frac stages.  Under a restricted choke, it had a pressure of 9,400 psi.  A previous nearby Mid-Bossier completion, Grizzly #1 (#691612), has been flowing for four months and is still producing at a rate of 7.3 MMcf/day with flowing tubing pressure of 6,524 psi on a 15/64" choke.  Cumulative production for Grizzly over that four month period has been just over 1 Bcf.

Two more Mid-Bossier wells are nearing completion.  The Halbert Trust #1 (#694989, operated by Eagle O&G) has been fracked and is expected to have initial production by late December.  The Bengal #1 (#700622) has been drilled with a 4,400 lateral.  Crimson expects completion to commence in January 2011. Gobi and Grizzly are in the Bruin Prospect Area, Halbert is in the Fairway Farms Prospect Area and Bengal is in the Tiger Prospect Area.

EIA: Storage -89 Bcf to 3.725 Tcf

The weekly EIA working gas in storage report showed an 89 Bcf decrease, bringing the level of gas in storage to 3.725 Tcf.  The weekly withdrawal was greater than last year's (-57 Bcf) and the five year average (-74 Bcf).   Current storage levels are 1.5% below last year's level (-57 Bcf) but still 9.8% higher than the five year average (+332 Bcf).


Low temperatures drove the higher than average withdrawal, as the week's temperatures were 5.1 degrees below last year's and 1.9 degrees below normal.

Wednesday, December 8, 2010

Argentina Announces Shale Gas Discovery

Add Argentina to the list of countries with potential shale gas reserves.  Yesterday, YPF, a subsidiary of Spain's Repsol, announced that it had discovered 4.5 Tcf of shale gas in the Loma de la Lata Field in the Patagonian province of Neuquen.  The government had previously hinted that the prospect could be as large as 257 Tcf, but that is unproven.

This is big news for Argentina, which has become a net gas importer.  There are questions about the find's economic viability, but it is a big deal in a country that hasn't seen much new gas production of late.

Interestingly, the Argentine announcement had a very American flavor.  The announcement was timed to coincide with a public offering of YPF's stock, not unlike the timing of Chesapeake Energy' "discovery" of the Haynesville Shale and its own financing efforts in March 2008.

I guess next steps are for Repsol or YPF to make a minority investment in an American producer's shale gas field.  I'm sure Chesapeake has approached both companies with investment packages by now.

"Smart Money" Still Investing in Gas

News came yesterday of a new joint venture between KKR and El Paso in a new natural gas midstream joint venture.  The deal makes a lot of sense for each group, especially KKR, which has a lot of cash to invest as equity.  KKR has already made a number of investments in the natural gas "space" and recently formed an energy-focused investment joint venture with RPM Energy (although in the El Paso deal, KKR seems to be acting alone).

While this deal is not Haynesville-related, it is an indication that gas is not dead.  Smart people with a long-term perspective are still spending, case in point:
Some deals will be aimed at consolidation, a natural activity in a cyclical industry like energy because as heft aids survival in bad times (see: AGL Resources acquisition of Nicor in the natgas distribution industry).  But I'm talking about growth investments, especially with outside financial sponsors.  While we may not see as many blockbuster shale deals from multi-national firms looking to get into North American shale, I think we will continue to see a range of transactions from buyouts to farm-outs to joint ventures as natural gas assets remain undervalued relative to their potential future value.

Sunday, December 5, 2010

New Texas Completions

Completions:
  • Red River 619 B #1, EXCO Operating: 8.043 MMcf/day IP, 16/64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: SP RR CO/WATERMEN, W M , A-619
  • Red River 365 B #2 H, EXCO Operating: 18.071 MMcf/day IP, 20/64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: HARDING, G , A-365

Developmental Activity:
  • Key Deep GU #1 H, NFR Energy; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: FIELDS, I N , A-260
  • Coffman Unit #1 H, EOG Resources; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: MORA, J M, A-827
  • A.Gomez SU #1 H, EXCO Operating; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: GOMEZ, J, A-227

Friday, December 3, 2010

Haynesville Rig Count: Unchanged at 158

The weekly Haynesville Shale rig count was unchanged at 158.  A two rig decrease in Louisiana netted out a two rig gain in Texas.  The Louisiana count has been steadily dropping since it peaked in late July at 136.  The Texas count peaked at 52 in early July, but 45 rigs is the highest level since late October.



U.S. Rig Count: +26 to 1,713

The Baker Hughes weekly rig count for the U.S. jumped by 26 to 1,713, the highest level since December 26, 2008.  Oil rigs increased by 18 to 742 and gas rigs increased by 8 to 961.  Miscellaneous rigs held steady at ten.  By type, horizontal rigs were up 18, vertical rigs up six and directional rigs up two.  Horizontal rigs now represent 56.4% of domestic rigs deployed, a record high level.

The rig count in the Haynesville region, inclusive of other formations, was up by three to 184.  North Louisiana held steady at 123 while east Texas was up three to 61.

I hope to have detailed Haynesville Shale rig counts by late afternoon, but I am out west this weekend and it might be later than usual.

Some Strong New Completions in Louisiana

  • EWM 28 H #1, Petrohawk Operating: 7.562 MMcf/day IP on 14/64 in. choke at 8,194 psi; Caspiana Field, Caddo Parish, S21/T15/R12; res. A, serial #240597
  • Martha Ellis 36 H #1, Petrohawk Operating: 7.762 MMcf/day IP on 14/64 in. choke at 8,318 psi; Greenwood-Waskom Field, Caddo Parish, S1/T15/R13; res. A, serial #241701
  • Graham 23-14-16 H #1, Chesapeake Operating: 13.027 MMcf/day IP on 22/64 in. choke at 6,017 psi; Bethany Longstreet Field, DeSoto Parish, S23/T14/R16; res. A, serial #240982
  • Rocking G Farms 30 #1, SWEPI, LP: 17.431 MMcf/day IP on 24/64 in. choke at 8,519 psi; Brushy Bayou Field, DeSoto Parish, S30/T11/R11; res. A, serial #240586

Thursday, December 2, 2010

EIA: Storage -23 Bcf to 3.814 Tcf

The weekly EIA working gas in storage report showed a 23 Bcf decrease to 3.814 Tcf.  The current level is 23 Bcf (-0.6%) lower than last year's storage level and 347 Bcf (+10.0%) higher than the five year average.  The weekly withdrawal was far better than last year (a 2 Bcf injection) but not as good as the five year average (36 Bcf withdrawal).


The weekly changes reflected regional temperatures, which were 1.7 degrees warmer than normal but 3.0 degrees cooler than last year.  Temperatures in the East Region, which has the largest storage capacity and usually drives the withdrawals in the cold months, were actually warmer than normal last week.  Storage across the Producing Region actually increased for the week.

Tuesday, November 30, 2010

Hydraulic Fracturing Disclosure Coming?

From the AP:

WASHINGTON — The Interior Department may require natural gas drillers to disclose the chemicals being used in a controversial drilling technique called hydraulic fracturing.
Interior Secretary Ken Salazar says officials are weighing a policy that includes disclosure requirements for fluids used in the technique.
Salazar hosted a forum Tuesday on the drilling practice, in which crews inject millions of gallons of water, mixed with sand and chemicals, underground to force open channels in sand and rock formations so natural gas will flow.
Salazar called the technique “a hot and very difficult issue,” both on public and private lands.
The New York Assembly approved a temporary ban on hydraulic fracturing this week.
Not surprising.  The more you hide (especially when you're Halliburton), the more people will press.  We've always advocated for disclosure on these pages.  Let's just hope the disclosures are accompanied by the small quantities the chemicals actually represent of the total fracking fluid.

New York Times on Gas Replacing Coal

An article in the New York Times paints a compelling picture of the shifting landscape for utilities as natural gas slowly begins replacing coal as the prudent choice for power generation.  With the death of carbon legislation, this shift will happen more slowly, but it will happen.  Coal won't go away, but it gradually will lose market share.

While people wag on in different directions about the impact of carbon on the climate, the unavoidable fact is that burning coal emits other dangerous pollutants such as mercury, sulfur dioxide, nitrogen oxide and particulate pollutants.  There are scubbers that can reduce (not eliminate) the impact of these pollutants, but retrofits are expensive. especially when a large portion of the coal power infrastructure is as old as it is.

Third World CNG

I read an interesting article on CNG in one of those Wall Street Journal special sections on energy yesterday (no subscription required). The point of the article is that there has been relatively wide adoption of compressed natural gas vehicles in some second and third world countries, all for different reasons.  At the end of 2009, there were about 11.4 million CNG vehicles, and 73% of them were in Pakistan, Argentina, Iran, Brazil and India.

The most interesting member of the list is Iran, where 15% of the country's 11 million vehicles are natural gas fueled.  Reasons here are two-fold: 1) while the country has lots of oil, it has limited gasoline refining capacity and 2) with the threat of growing international trade sanctions to punish the country for its pursuit of nuclear weapons, refined gasoline will be harder to obtain.  Oh, and it also sits on the second largest natural gas reserve in the world.  Just like in the U.S. a big limiting factor is a dearth of CNG fueling stations.  The country has around 1,500 but expects to add another 900 in a year or two. I guess the good thing about an authoritarian regime is that you can get stuff done quickly.

In the U.S., we have anything but an authoritarian regime (no matter what picketers in powdered wigs say) so we will have to depend on a combination of government incentives to stimulate the market to build the CNG fueling infrastructure.  It won't happen overnight, but I am increasingly of the belief that there will be a real market for CNG vehicles in the U.S.  It just might not be very robust for at least another five to ten years, and even then it will be a poor stepchild to oil-based gasoline.

EXCO 2011 Capital Budget

Yesterday, EXCO Resources announced its 2011 capital budget.  The total capital budget will be $976.2 million, of which $781.8 million, or 80%, will be spent in east Texas and north Louisiana primarily targeting the Haynesville Shale.  Of the $781.8 million Haynesville budget, $683.0 million will be spent for drilling and completion costs, $29.8 million for lease acquisitions, $41.8 million for operations projects (i.e. water resources, roads, etc.), and $2.4 million for seismic data acquisition.

EXCO is not wilting in the face of low commodity prices, as the company expects to increase production 40% over 2010 levels.  But the company did caution that 14 of its current 25 rigs (27 rigs in 2011) are on short term contracts and can be idled if commodity prices are too low (although it did not specify where the 14 short-term rigs are located).

In the Haynesville Shale, EXCO plans to maintain 22 rigs to drill 163 gross wells (58.7 net):

Monday, November 29, 2010

Texas Completion/Activity (Lots of Activity)

Completions:
  • Ironosa #1H, SM Energy: 10.332 MMcf/day IP, 20/64" choke; North Carthage Field (Bossier Shale), Sabine Co., Survey: PATTERSON, J T, A-224
  • Henderson Trust Unit #1H, EOG Resources: 10.425 MMcf/day IP, 30/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: MORA, J M, A-827
  • Red River 365 A #1, Exco Operating: 21.226 MMcf/day IP, 20/64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: HARDING, G , A-365

Developmental Activity:
  • Harris Munden Gas Unit #13 H, NFR Energy; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: LINDSEY, P, A-391
  • Harris Munden Gas Unit #14 H, NFR Energy; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: LINDSEY, P, A-391

Well Said

An editorial in yesterday's Shreveport Times clearly stated the best course for the future of drilling and exploration in the Haynesville Shale.  It can be summarized in one word: balance.

The issue of mineral exploration has many sides, but the extremes often find the large and eager audiences, from "drill, baby, drill!" to "frack no!"  But what often gets lost in the rabble is the middle ground where the rest of us live.  The reality is that we need fossil fuels to run our country and the best place to source them is right here at home.  But what's the best way to achieve both of those goals?  Answer: we have to balance the need to drill, with its related benefits, from jobs to wealth creation, against the need to protect the environment and maintain favorable living conditions.

An important part of this balance is having a regulatory structure that is both empowered and funded.  Business too often fights regulation.  It is the nature of the "free" market to avoid any shackles, perceived or otherwise, but   the truth is that business can't effectively self-regulate.  There must be checks and balances.  It is the foundation of the U.S. government and it has proven to be very successful, if messy.  Many folks might not like it, but if you've got nothing to hide...

Sunday, November 28, 2010

Lots of New Louisiana Completions

  • Jestma LLC 14 H #1, Petrohawk (KCS): 7.593 MMcf/day IP on 14/64 in. choke at 8,110 psi; Elm Grove Field, Bossier Parish, S11/T16/R11; res. A, serial #241546
  • English 31-15-16 H #1, Chesapeake Operating: 11.52 MMcf/day IP on 22/64 in. choke at 5,776 psi; Bethany Longstreet Field, Caddo Parish, S31/T15/R16; res. A, serial #240870
  • Caddo Ser 12-16-16 H #1, Chesapeake Operating: 10.752 MMcf/day IP on 22/64 in. choke at 5,520 psi; Greenwood-Waskom Field, Caddo Parish, S12/T16/R16; res. A, serial #240716
  • Slaughter 6-15-15 H #1, Chesapeake Operating: 13.346 MMcf/day IP on 22/64 in. choke at 6,100 psi; Johnson Branch Field, Caddo Parish, S6/T15/R15; res. A, serial #241122

Friday, November 26, 2010

Haynesville Rig Count: +2 to 158

This week, the Haynesville rig count increased by two to 158.  Louisiana held steady at 115 while Texas increased by two to 43.  This latter is rather surprising given the fact that the overall east Texas rig count was down by three.  Haynesville drilling in east Texas (District 6) this week represents 74% of the working rigs, up from 67% last week.  What may be more surprising is that the two new rigs are drilling in Harrison County, which had pretty much been left for dead of late.


Wednesday, November 24, 2010

U.S. Rig Count: +10 to 1,687

The weekly Baker Hughes rig count showed a ten rig increase in the U.S., bringing the total number of working rigs to 1,687, the highest level for the past 12 months.  For the week, gas rigs increased by 17 to 953, while oil rigs dropped by seven to 724.  By type, horizontal rigs increased by 16, while directional rigs increased by three and vertical rigs decreased by nine.

In the Haynesville Shale region, inclusive of other formations, the rig count continued to drop, this week decreasing by five to 181, which is 40 rigs off the 12 month peak of 221 achieved April 30, 2010.  The count was down by two in north Louisiana (123) and three in east Texas (58).

Because of the holiday, the detailed Haynesville Shale rig count will be a little delayed.  I'll try to sneak away to work on it tonight and tomorrow, but it will definitely be done by Friday.  Happy Thanksgiving!

EIA: Storage -6 Bcf to 3.837 Tcf

The weekly EIA working gas in storage report showed a 6 Bcf decrease in storage to 2.837 Tcf.  The weekly change is somewhere between last year's change (+5 Bcf) and the five year average (-13 Bcf).  The current storage level is only 7 Bcf higher than last year's (record high) level and 334 Bcf, or 9.5%, higher than the five year average.

Happy Thanksgiving!

Thanksgiving means something different to everyone.  I can be something of a complainer, but on Thanksgiving I try to take some time to reflect on the things for which I am truly thankful. Like many others, I am the beneficiary of gifts - direct and indirect - that have shaped my life.  While I tend to be a lone wolf, I am also the recipient of much help and guidance from others.  Nobody is truly alone in this world, and I am thankful to those who have helped me, either overtly or through an invisible hand.

I am thankful for the safe arrival of our second child and the continued happiness my little family.  I am thankful for the good (and improving) health of those close to me.  I am blessed to have had good opportunities in life and I hope to create new and wonderful things as a means of acknowledging these gifts.

I am also thankful for those out there who have followed this web site.  While I consider this a self-indulgent project, I get really jazzed when I hear from readers.  (I guess I'm thankful I don't get more hate mail.)  We live in exciting times.  As long as we keep our eyes on the horizon, continue to do good work and proceed cautiously through the negativity, we will be alright.

Happy Thanksgiving to you and all of yours.

Tuesday, November 23, 2010

More LNG Export in the 'Hood

Australian investment bank Maquarie, famous in financial circles for its investment in infrastructure projects like U.S. toll roads, has partnered with Freeport LNG to provide financing to retrofit Freeport's Texas LNG import facility to become an export facility.  Freeport's plans are similar to those of Cheniere Energy's Sabine Pass facility, and the project is expected to cost around $2 billion. (A good longer article from the Houston Chronicle.)

While financing is an important hurdle, the facility must also get a number of regulatory approvals before construction will begin.  Building an LNG export facility is a long-term project and will not help solve the current imbalance in U.S. natural gas supply and demand that has crushed prices, but it does bode well for the future of natural gas in this country.

If you are looking for another reason to like natural gas, here's a nice tid-bit from the article on the Financial Times web site noted above:

"The shale boom has made the country the world’s biggest natural gas producer, with 57bn cu ft a day of output, according to Nikos Tsafos of PFC Energy, the consultancy. If the US exported just a 10th of its gas last year, he says, it would have been the world’s top LNG exporter."
Hmmmm, the U.S. has an enormous trade deficit.  Hmmmm, we can export natural gas to other nations, including China.  Hmmmm, hmmmm, hmmmmmmmmmm.  Did someone say "win-win?" (Although the quote above doesn't consider Qatar's massive LNG export infrastructure that mostly came on line in 2010.)  

Exxon Halts N.J. LNG Project

In a move that should surprise nobody, Exxon announced yesterday that it is suspending work on its planned Blue Water Energy LNG plant off the coast of New Jersey.

Why did it take so long to make the decision?  Seems like a no-brainer on the surface.  I can't say for sure, but I think it speaks to Exxon's belief in the potential for North American shale gas (as if its $36 billion acquisition of XTO Energy last year wasn't enough evidence) and in the viability of the Marcellus Shale.

Because of its concentrated population, remote coastal location and its high levels of gas use, the Northeast is one of the few areas of the U.S. that imports some natural gas from other countries.  The Marcellus Shale is the largest gas shale deposit in North America, but perhaps what makes it really attractive is its proximity to the Northeast gas markets.  But if exploration in the Marcellus is limited by local politics for more than a decade, an LNG port off the coast of New Jersey would make sense.  I guess not any more.

Exxon is a company that makes well-considered decisions, so I view this as another ringing endorsement of the future of shale gas.

Haynesville Movie on CNBC Tonight

Gregory Kallenberg's documentary "Haynesville" will play on CNBC tonight three times, 9:00 p.m., 10:00 p.m. and midnight (central).  It will show again on Sunday at 9:00 p.m.

"Haynesville" follows three people in the early days of the Haynesville Shale as they deal with the potential economic windfall that comes with drilling the shale under their feet.  It is important to remember that the film is a documentary and not a debate about the pros and cons about modern drilling.  If it had been completed later, the hydraulic fracturing hysteria would be unavoidable, but the film predates the fracking histrionics.

Here is my reaction from a screening last year if you care to read it.  While I consider the film a "sociological" film rather than an "advocacy" piece, having a point of view as a documentarian is unavoidable.  While there is a pro-gas lean to the film, the movie follows the drama in the lives of a few individuals trying to comprehend the personal impact of the Haynesville Shale.  At the same time, the filmmakers - like everyone else at the time in 2008 and 2009 - are trying to figure out what the Haynesville Shale was all about and if shale gas is for real. (It seems crazy that 2008 feels like ancient history to me now.)

Monday, November 22, 2010

New Texas Completions

Completions:
  • Betty Fults #1H, Noble Energy: 5.874 MMcf/day IP, 17/64" choke; Carthage Field (Haynesville Shale), Shelby Co., Survey: LINDSEY, A , A-423
  • Crockett #1H, SM Energy: 8.327 MMcf/day IP, 18/64" choke; Carthage Field (Haynesville Shale), Shelby Co., Survey: DAVIS, N, A-174
  • R. Griffin GU #1H, Devon Energy: 6.378 MMcf/day IP, Adj./64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: ROBERTS, E , A-37
  • Walters Gas Unit #1H, Cabot Oil & Gas: 8.295 MMcf/day IP, 12/64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: MOSS, J , A-189

Gazprom Makes No Price Concessions to Europe

Is this the face of compromise?


I think not.  Russian media reported last week that the country's energy giant OAO Gazprom will not provide its European partners with a price break even though it is selling into a market with lower demand and higher supply.  Russia provides around a quarter of Europe's natural gas through long-term contracts with prices pegged to the price of oil.  In recent  years, thanks to massive LNG projects in Qatar and the advent of shale gas in North America, there is a new spot market for gas developing in Europe with lower prices than those in Russian gas contracts.  As a result, pressure has grown for Russia to make price concessions.

Russia has resisted taking the first step down this slippery slope.  The news comes in the context of Russia's price negotiations with Belarus, the former Soviet republic that now enjoys the lowest Russian gas prices.  It also coincides with the arrival of the first LNG shipment from the United States (a re-export from Cheniere's Sabine Pass facility).

Only time will tell if Russia's resistance to price compromise will be a good strategy.

Friday, November 19, 2010

"Where Have All the Rigs Gone?" Asks Red River Parish

Perusing the declining rig count in Louisiana, it is pretty easy to tell from where the rigs are disappearing: Red River Parish.  Over the course of two months, from September 17 to November 19, 2010, the rig count dropped by 22, from 32 to 10.  Over that same period, the total Haynesville rigs in Louisiana dropped by 15, from 130 to 115 (the peak was July 30 at 136).

What's changed?  Looking at the operators, the big change is that EnCana moved 13 of its 16 rigs out of the parish. That trend somewhat mimics EnCana's Haynesville rig count over the same two month period, which has dropped by ten, from 26 to 16.



Haynesville Shale Rig Count: -4 to 156

The Haynesville Shale working rig count took another dip this week, dropping by four to 156, the lowest count since February 5, 2010.  Texas saw a one rig increase while Louisiana dropped five rigs.


U.S. Rig Count: -8 to 1,677

The weekly Baker Hughes rig count showed an eight rig decrease to 1,677.  Since last week's figure of 1,685 was the high point for the past 12 months, rig counts are still pretty high.  Behind the numbers, gas rigs dropped by 19 to 936, which is 5.6% off the 12 month high point achieved in mid-August, while oil rigs increased by 11 to 731, the highest number for the past 12 months.  By type, there were eight fewer horizontal rigs, four fewer vertical rigs and four additional directional rigs working.

In the Haynesville region, inclusive of other formations, the rig count dropped by six to 186.  Working rigs were down five in north Louisiana (125) and down one in east Texas (61).

Thursday, November 18, 2010

Recent Louisiana Completions

Maps and completions spreadsheet have been updated.
  • Pankey 34-14-15 H #1, Chesapeake Operating: 12.192 MMcf/day IP on 22/64 in. choke at 6,058 psi; Bethany Longstreet Field, DeSoto Parish, S34/T14/R15; res. A, serial #241117
  • John Burford 29 H #1, EnCana Oil & Gas: 14.851 MMcf/day IP on 22/64 in. choke at 7,084 psi; Bethany Longstreet Field, DeSoto Parish, S29/T14/R14; res. B, serial #240995
  • Land + Knowles 18 H #1, EnCana Oil & Gas: 17.289 MMcf/day IP on 23/64 in. choke at 7,237 psi; Holly Field, DeSoto Parish, S18/T14/R14; res. A, serial #240962
  • Lonnie Welch 20 H #1, EnCana Oil & Gas: 9.602 MMcf/day IP on 15/64 in. choke at 8,453 psi; Oxford Field, DeSoto Parish, S20/T11/R12; res. Jur-A, serial #240705

EIA: Storage +3 Bcf to 3.843 Tcf

The weekly EIA working gas in storage report showed only a 3 Bcf increase last week, bringing the total gas in storage to 3.843.  The current storage figure is a record high for the week, but only by a whisker (13 Bcf) over last year's level, but it is 9.3% higher than the five year average for this time (3.516 Tcf). The weekly injection was considerably lower than last year's (+21 Bcf) and the five year average (+18 Bcf).


Average temperatures across the country were just slightly above normal, but as the map below shows, the average was misleading because there was significant fluctuation by region.

Wednesday, November 17, 2010

Will NAT GAS Act Cross Finish Line?

The long-awaited legislation to promote natural gas use in vehicles was temporarily stalled by its sponsor Sen. Harry Reid (D-NV) as he negotiates for more bipartisan support to get the bill passed.  With the tumult in Congress after the recent elections and the other priorities of the lame duck session that started this week, the NGV legislation is the only energy bill with a hope of passing.

While Reid is working to get more Republicans on board, he is also getting push-back from within his own party.  Among the offenders is Sen. Tom Harkin of Iowa who wants to add support for biofuels to the bill.  Adding ethanol to a bill about natural gas would be a travesty, a classic two steps forward, one step back move.  Hopefully Harkin's vote won't be needed to pass the bill.

Unfortunately, as politicians start to focus on the 2012 election cycle, prospective presidential candidates will start to visit Iowa again (Newt Gingrich is there this week) and fall under the spell of converting perfectly good food into vehicle fuel.  Of late, the ethanol folks have been pushing for an E-15 standard to increase the potential ethanol component in gasoline from 10% to 15%.  The attempts failed after the 2008 election was over, but the campaign likely will get more attention with 2012 coming.

Haynesville Movie to Premiere on CNBC

The audience for Gregory Kallenberg's documentary "Haynesville" will grow exponentially on November 23 when it premieres on CNBC at 9 p.m. EST/8 p.m. CST.  It will be replayed 10 p.m., midnight and 1 a.m.  It will also be played on Sunday November 28 at 10 p.m. EST/9 p.m. CST.

Congrats to the "Haynesville" team - break a leg!

Tuesday, November 16, 2010

Questar Announces 2011 Capital Budget, Well Economics Update

OK, I'm having trouble calling the company QEP Resources, which is the new name for Questar E&P, which was spun off from the Questar earlier this year.  If there is one thing we don't need is more natural gas companies that go by their initials (EOG, SM, XTO, SWEPI, J-W, NFR) or quasi-acronyms (EXCO, BEUSA).   "Questar" sounds like a made-up word to me, but it makes more sense than initials.  That complaint aside, the company formerly known as Questar announced a capital budget of $1.05 billion for its E&P business in 2011.  Not surprisingly, that figure is $110 million lower than the 2010 budget.  

The press release didn't offer many specifics beyond that 60% of the budget will be directed towards the company's Midcontinent operations, which is the Haynesville region, the Texas Panhandle and the Woodford Cana in Oklahoma.  Currently, Questar is running seven rigs in the Haynesville and two each in the Panhandle and Woodford.  Haynesville wells cost between $8.5 and $9.5 million, while Panhandle wells cost $7.0 to $8.7 and Woodford wells run between $6.5 and $8.5 million.  On the surface, the well count and the midpoint of the cost ranges imply that approximately 68%, or around $714 million of the capex budget will be spent in N. Louisiana, but that's just my rough calculation.

Thoughts on the "60 Minutes" Piece

I tried to keep an open mind when viewing the piece on shale drilling on Sunday's "60 Minutes" program.  In all, I found that it was fairly objective but it fell victim to the big logical fallacy being perpetuated by anti-shale advocates that hydraulic fracturing has caused the recent gas-related incidents in Pennsylvania.

Because the point of departure for the piece was the new wealth created for landowners, specifically in the Haynesville Shale, at least the story had some hoofing to do to get to the gripes of the anti-shale folks (much to the chagrin of people posting complaints on the "60 Minutes" web site).  Since most stories seem to start with the negative view, that change in perspective was refreshing.  To me the wealth creation is one of the least effectively told stories out there.  Not just the million dollar checks but the opportunity for normal folks to earn a residual on their land so that they can continue to farm and pursue other interests without the land ownership being a burden.  I predict this will be an even bigger story in the Marcellus Shale.  I'm glad the producers didn't go overboard in trying to portray TX/LA residents as the "Beverly Hillbillies," but they did have the obligatory, patronizing gold Cadillac shot.

Monday, November 15, 2010

60 Minutes

I've embedded the much discussed segment on shale gas and the Haynesville Shale from "60 Minutes" that aired last night.  If it doesn't work here, you can go to it by following this link (although you might have to upgrade your Adobe Flash).



For a good time, go to the 60 Minutes web page to see the howling negative reactions from the anti-fracking (and anti-lots-of-other-things-too) crowd.  The discussion was totally hijacked by the cons.

Recent Texas Completions

Completions:
  • Black Stone Unit A-43 #1H, EnCana: 17.04 MMcf/day IP, 28/64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: SPEAR, A , A-43  (this is an update of a well that was previously reported at 32.0 MMcf/day)
  • Red River 589 #1, Exco Operating: 8.603 MMcf/day IP, 16/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: WALLING, JESSE , A-589
  • Martinsville #1H, Marathon Oil: 7.539 MMcf/day IP, Adj./64" choke; Carthage Field (Haynesville Shale), Shelby Co., Survey: POLVADORE, P N , A-965
Developmental Activity:
  • Verhalen "H" #8 H, GMX Resources; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: POE, A , A-19
  • Furrh "H" #1 H, Comstock Resources; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: STROUD, J B , A-653
  • Scoggins Gas Unit #1 H, EOG Resources; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: YBARBO, J I , A-60
  • Patterson SU #1 H, Exco Operating; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: WOOD, C , A-310

Friday, November 12, 2010

Haynesville Shale Rig Count: -5 to 160

The weekly Haynesville Shale working rig count continued to decrease this week, dropping by five rigs to 160, its lowest level since early February 2010.  The count dropped by four in Louisiana to 120 and by one in Texas to 40.  Rig count spreadsheets and maps have been updated.



While it is difficult to assess trends on a weekly basis, it does seem clear that the Haynesville rig count peaked July 30 at 184 and that we are definitely witnessing a downhill slide.  I think the decline will be gradual for the next year, but if natural gas prices don't improve it will be dramatic at year end 2011.

U.S. Rig Count: +2 to 1,685

The weekly Baker Hughes rig count showed a two rig increase to 1,685.  Gas rigs held steady at 955, while oil rigs increased by two.  By type, vertical rigs were up by 14, while directional rigs decreased by nine and horizontal rigs decreased by three.  Even with the drop, horizontal rigs still represent 55.8% of the rigs operating today, compared to 46.5% this week last year and 32.1% this week two years ago.

In the Haynesville Shale region, inclusive of other formations, the rig count dropped by four to 192.  East Texas dropped three rigs to 62, its lowest level since January 22, 2010, while north Louisiana dropped one to 130.

China and India Get It, Why Can't We?

There was a great piece at the Financial Times web site yesterday noting two important developments:
  1. A shale gas technology sharing pact between the U.S. and India like the deal signed earlier this year between the U.S. and China, and
  2. An memorandum of understanding agreement between LNG company Cheniere Energy and China's ENN Trading to contract processing capacity at Cheniere's Sabine Pass facility.
What's in common here?  China and India understand the importance of natural gas.  They get it.  

For all the bitching and moaning by the U.S. several years ago when we backed out of the Kyoto Protocol ostensibly because developing nations - especially China - were still big polluters, few nations have done more to bring cleaner energy to the forefront in the last few years than China.  To keep up with demographic shifts and economic growth, China still builds lots of coal-generating power plants, but the country is taking real steps forward, especially where it concerns natural gas.  

Thursday, November 11, 2010

Shut Out on Chesapeake Call

Oh, how times have changed!  I read through the Chesapeake Energy third quarter earnings call this afternoon and there was not a single mention of the Haynesville Shale in the script or the Q&A.

It sort of hurt my feelings.

This from the company that frequently touted its "discovery" of the Haynesville Shale just two years ago.  I guess every flower must fade, but my guess is that when gas prices recover, Chesapeake will be back knocking on our door once again wearing a crisp suit carrying bouquet of fresh flowers and a box of chocolates.  What will we say to our admiring suitor then?

Louisiana Lease Sale; Other Gas Property Deals

The Louisiana Mineral Board held its monthly lease sale yesterday, and properties in the Haynesville Shale region generated an average lease bonus of $9,419.  The weighted average considering parcel size was $9,893. This average is roughly double the lease sales for the past couple of months, but it likely is more a reflection of the quality of the acreage than some overall change in market sentiment towards value.


What is certain is that the prolonged downturn in natural gas prices has not reduced the buy/sell activity in the mineral lease market.  The difference now is the valuation of the properties.

Even More Louisiana Completions

Here is another batch of 19 LA Haynesville completions to go along with the ones posted Tuesday.  The map and spreadsheet have been updated.
  • Moon Lake 10 #2, J-W Operating: 11.5 MMcf/day IP on 20/64 in. choke at 5,100 psi; Elm Grove Field, Bossier Parish, S9/T16/R12; res. A, serial #241077
  • Gorman 14-15-11 H #1, Chesapeake Operating: 16.209 MMcf/day IP on 22/64 in. choke at 7,694 psi; Swan Lake Field, Bossier Parish, S14/T15/R11; res. A, serial #240499
  • Leonard Rd Frms 32 #2-ALT, EXCO Operating: 6.5 MMcf/day IP on 20/64 in. choke at 5,100 psi; Elm Grove Field, Caddo Parish, S32/T16/R13; res. LCV-A, serial #240747
  • Hutchinson 28 H #1, Petrohawk Operating: 7.709 MMcf/day IP on 14/64 in. choke at 7,921 psi; Elm Grove Field, Caddo Parish, S30/T16/R12; res. A, serial #241405
  • Western D 18-15-15 H #1, Chesapeake Operating: 12.288 MMcf/day IP on 22/64 in. choke at 5,140 psi; Johnson Branch Field, Caddo Parish, S18/T15/R15; res. A, serial #240885

Wednesday, November 10, 2010

LNG U-Turn Heading to Britain

This weekend, a shipment of LNG will be re-exported from the U.S. to Great Britain.  While only a drop in the proverbial bucket of worldwide natural gas supply, it is a symbolic shipment because the gas shipped to Britain can be piped directly to Northern Europe via a pipeline to Belgium and distributed to customers that have long been held captive by Russian natural gas and its oil-indexed pricing.

The article linked above has more details, but it is yet another indication of the widespread impact of North American shale gas on the worldwide natural gas market, including further erosion of Russia's clout in Europe.

EIA: Storage +19 Bcf to 3.84 Tcf

Whew, a little relief from the weekly storage report.  The EIA reported that storage increased 19 Bcf last week to 3.84 Tcf.  It s a record high level, but the weekly injection is less than the 23 Bcf injection expected by analysts.  The weekly injection was 24% lower than last year's (+25 Bcf) and 37% lower than the five year average (+30 Bcf).  The current storage level stands 0.8% above last year's record figure and 9.8% above the five year average.


For the first time in a month, temperatures were slightly below the norm for the week.

Tuesday, November 9, 2010

EIA Reduces Projected NG Price Again

The soothsayers at the EIA released their monthly short-term energy outlook.  In it, the governmental agency lowered its estimate for the average natural gas price for 2011 to $4.31/MMBtu.  That's a decrease of 27 cents from last month's estimate.

In terms of gas in storage, EIA estimates that this November will see a net 3 Bcf decrease.  That implies there will be some more injections before the withdrawals start, not really a surprise.  EIA also estimates that storage levels in March 2011 at the end of the withdrawal season will be a patriotic 1.776 Tcf.  That's 114 Bcf higher than 2010's trough number.

This and $2.50 will get  you a short latte at Starbucks, but it's always interesting to watch the accuracy (or lack thereof) of projections.

Some Recent Louisiana Completions

  • Morrell ETAL 8 H #1, Chesapeake Operating: 15.072 MMcf/day IP on 22/64 in. choke at 6,444 psi; Caspiana Field, Caddo Parish, S8/T15/R14; res. A, serial #240756
  • Bedsole 33 #1, Chesapeake Operating: 13.848 MMcf/day IP on 22/64 in. choke at 6,177 psi; Trenton Field, DeSoto Parish, S33/T12/R13; res. A, serial #239562
  • Lee 20 #2-ALT, EXCO Operating: 12.448 MMcf/day IP on 20/64 in. choke at ? psi; Caspiana Field, DeSoto Parish, S20/T14/R12; res. A, serial #240598
  • Moran 21 #2, EXCO Operating: 10.389 MMcf/day IP on 20/64 in. choke at 6,716 psi; Kingston Field, DeSoto Parish, S21/T14/R13; res. A, serial #240680
  • Moran 28 #2-ALT, EXCO Operating: 4.085 MMcf/day IP on 20/64 in. choke at 3,175 psi; Holly Field, DeSoto Parish, S21/T14/R13; res. A, serial #240665
  • Preston 19 #1-ALT, EXCO Operating: 12.245 MMcf/day IP on 20/64 in. choke at 7,352 psi; Caspiana Field, DeSoto Parish, S19/T14/R12; res. A, serial #241136
  • Guy Farms 24 #1, SWEPI, LP: 7.534 MMcf/day IP on 15/64 in. choke at 8,356 psi; Trenton Field, DeSoto Parish, S24/T11/R13; res. Jur-A, serial #238957

I expect more later this week.  I'll update the spreadsheet and maps then.

Site Update: Survey Info for Texas Wells

Never let it be said that I don't read my email.  By popular demand I will start including survey information (survey name and abstract) in all new Texas completions and developmental activity posts, starting with yesterday's post.

I will work diligently to collect this information for all of the wells on the completions spreadsheet, but it might take a while.  I'm already working on collecting latitude/longitude data so I can create maps of the Texas data, but since it is a time-consuming, manual process, I'm only about halfway done with the first project.  I hope to have both done a month or so, unless outside obligations absorb all my time.

Chevron, Welcome to the Shale Party; What About the Other Independents?

This morning, Chevron announced that it is acquiring Atlas Energy, a big leaseholder in the Marcellus Shale, for an enterprise value of $4.3 billion, including $1.1 billion of assumed debt.  With this acquisition, most of the biggest players are now represented at the shale party.

Atlas controls 630,000 acres in the Marcellus Shale, but almost more importantly, Chevron is buying the company's experience in drilling shale.  This experience will continue to be used in the Marcellus but it can also be leveraged in some of Chevron's international shale projects.  Atlas also is a joint venture partner with India's Reliance Industries in the Marcellus, so Chevron will step in to that relationship in Atlas's place.

I've been waiting for Chevron to make its move in North America, and I think it picked a pretty good time.  Chevron has been involved in several European shale ventures, but those are speculative compared to the North American variety.

Monday, November 8, 2010

Recent Texas Completions

Completions:
  • Malcolm Gas Unit #1H, Samson Lone Star: 12.895 MMcf/day IP, 19/64" choke; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: A.G. Walling, A-590
  • Red River 620 No. 2 #1H, Exco Operating: 5.594 MMcf/day IP, 14/64" choke; Carthage Field (Haynesville Shale), San Augustine Co., Survey: HT&B RR CO / W.M. Watermen, A-620
Developmental Activity:
  • Kain GU 1 #2 H, Samson Lone Star; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: W. Smith, A-21
  • 4 M Tall Pines Gas Unit #1 H, EOG Resources; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: J.I. Y'Barbo, A-60
  • Jernigan Deep Gas Unit #1 H, XTO Energy; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: W. Mann, A-431
  • New Horizons No. I #1 H, XTO Energy; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: T.W. Walden, A-698
  • Cox #1 H, Chesapeake Operating; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: S. English, A-180
  • Hoosiers DU #2 H, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: Rusk CSL, A-592

Sunday, November 7, 2010

Shale Drilling and the Bogeyman

I arrived home this evening after a somewhat late dinner with my wife to find my Sunday New York Times sitting on my porch (it wasn't that late of a dinner). I perused it quickly (sports first, business second) and found an article about the Haynesville Shale on the first page of the business section.

The article is not terribly enlightening to anyone who follows shale drilling, but it draws an interesting (although somewhat incomplete) parallel between the relative comfort that Louisianans (and Texans) have with gas drilling compared to the fear that residents of Pennsylvania feel.  Interestingly, the article failed to point out that while there has been gas drilling in Louisiana for the past 100 years, there actually has been gas drilling in Pennsylvania for the past 151 years.

After an election cycle filled with fear-mongering, fear seems to be the dominant currency of public expression.  Fill people with feelings of uncertainty and dread and they will become an army of cooperative minions.  That has been the model in the Northeast, where people are deathly afraid of hydraulic fracturing because they think it will ruin their drinking water and kill their pets.  These fears are ironic given the terrible surface and groundwater pollution that coal mines have caused in the region for generations.

I scratch my head about this all the time.  Why do they get so worked up about gas drilling when coal mining is so much worse?  Last week, I was watching a special about the history of Halloween when it struck me that the big difference is the Bogeyman.  The Bogeyman became a common device used to generate irrational fear in an audience.  Concepts can be scary, but when you can focus on one particular person or thing - the Bogeyman - you amplify the fear exponentially.

In this case, hydraulic fracturing is the Bogeyman for the natural gas industry, while coal mining doesn't seem to have one.   It's easy to point to fracking as the evil, even when you can't substantiate that fracking has ever caused any environmental damage.  With coal, there may be this amorphous cloud of evil, but there's no handle, no foothold, nothing to grasp.  With fracking, you've got something on which to hang your proverbial hat.  Even the word "fracking" sounds evil and dangerous.  Clearly it was not coined by the marketing and PR department.

I don't offer any solutions at this late hour, only observations.  Just mind the Bogeyman - his bark is definitely worse than his bite.