Tuesday, November 2, 2010

Petrohawk: Update

Petrohawk released its operational update today.  A few highlights pertinent to the Haynesville Shale:

  • 2011 Budget in Haynesville will be about 35% lower than last year.  The biggest reason is that the company expects to have its lease retention strategy completed by mid-2011.  (This is the beginning of the end of fat capital budgets in the region.  If gas prices don't recover, look for a lean year in 2012.)
  • The pilot project to modify well design so that it will require lower pressure pumping equipment was completed and seems to be a success.  More tweaking will be required, but the technique will be used on 15 to 20 wells before year end 2010.  The pilot well, the Mendenhall 10 H #1 was completed at an IP rate of 8.4 MMcf/day on a 14/64" choke at 8,320 psi.  There was no indication of the budgetary impact of the modified well design.*
  • Haynesville production averaged 434 MMcf/day for the third quarter.  That represents around 63% of the company's total daily production.  The Eagle Ford Shale is picking up, but it's got a ways to go to catch up.  Petrohawk drilled 29 operated wells and participated in 72 non-operated wells for a total of 102 drilled wells in the quarter.
  • The company is running 12 rigs in the play, down from 16 at the beginning of the quarter.  The drop is not unexpected.  Petrohawk should keep 12 rigs in the play for the rest of the year.
  • Drilling is going faster.  Petrohawk is keeping up with the general trend towards fewer days of drilling per well.
  • Pressure pumping costs are going up while other completion costs going down.  We've heard this over and over again.  The company didn't elaborate on its drilled-but-not-completed inventory.  It's building everywhere else, so I doubt Petrohawk will be the exception.  I'll listen for more detail on the conference call.
  • Faster drilling + more expensive completions = "additional pressure on the 2010 budget."
*Kudos to Petrohawk for pioneering the modified well design to "democratize" (my word) Haynesville completions.  The limited amounts of high pressure pumping equipment (and subsequent high cost) is curtailing completion activity.  If Haynesville completions can be done with equipment that is more readily available, that's good for everyone (except suppliers and the natural gas supply).  Petrohawk also has been a leader in using restricted chokes for better gas recoveries.

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