Saturday, December 31, 2011

Chesapeake's Black Eye in Michigan

Chesapeake Energy CEO Aubrey McClendon was already an unpopular man in Michigan after his proposal to develop pristine dune land on the shores of Lake Michigan in Saugatuck, MI into a luxury development, but after a leasing fiasco in the Collingwood Shale in northern Michigan last year, he might as well keep his distance from Michigan from now on.

Last year, Chesapeake and Encana were in a leasing frenzy to tie up land rights in northern Michigan, but after a test well returned negative results, Chesapeake, through a front company, cancelled most of its signed leases with property owners. A number of property owners have sued the shell company set up to do the leasing and Chesapeake itself, and Reuters has done an investigative report revealing the ugly details behind the "land grab" strategy.  It makes for a very interesting reading for anyone leasing their land to an energy company.  It's a cautionary tale that nobody wants to see repeated.

Friday, December 30, 2011

Haynesville Shale Rig Count: +2 to 91

The Haynesville Shale rig count was up two to 91 this week.  Louisiana was up two to 59, while Texas held at 32.  For the year, the rig count is down 67 rigs from year end 2010.  Of that total, Louisiana saw the greatest decline, as its rig count was just about halved, down 56 rigs, or 49%.  Texas was down 11 rigs, or 26%.



2011 Haynesville Shale Top 10 List

Every year I say I’m not going to do a Top 10 Haynesville Play List, but then each year I get caught up in Top 10 mania and can’t resist it. I’ve broken it down into themes instead of specific stories. Here it goes, from 10 to 1:

10. Natural gas as vehicle fuel continues to progress, albeit slowly. Progress has come in small increments, but trucks are the Holy Grail and the federal NAT GAS Act to fund truck conversions still elusive at this point, no matter how many co-sponsors the bill has.

9. Haynesville drilling moving from holding acreage to larger scale production. There are still wells being drilled to hold acreage, but to a much smaller extent than in previous years. This year saw multi-well pads go from pilot programs to full scale operations in places. For many parts of the Haynesville, this will be the way gas will be drilled in the future.

Thursday, December 29, 2011

New Louisiana Completions

  • Franks 21-16-12 H #1, Chesapeake Operating: 15.96 MMcf/day IP on 22/64 in. choke at 6,815 psi; Perfs: 11,507-15,164, length: 3,657 ft.; Elm Grove Field, Bossier Parish, S16/T16/R12; res. A, serial #241856
  • Franks 16-16-12 H #1, Chesapeake Operating: 14.592 MMcf/day IP on 22/64 in. choke at 6,420 psi; Perfs: 11,561-16,077, length: 4,516 ft.; Elm Grove Field, Bossier Parish, S16/T16/R12; res. A, serial #242863
  • Cupples H #1, QEP Resouces: 8.691 MMcf/day IP on 16/64 in. choke at 7,900 psi; Perfs: 11,680-16,100, length: 4,420 ft.; Elm Grove Field, Caddo Parish, S11/T15/R12; res. A, serial #240577

U.S. Rig Count: -1 to 2,007

The weekly Baker Hughes U.S. rig count showed a one rig decrease to 2,007.  Oil rigs were down eight to 1,193, gas rigs were up seven to 809 and miscellaneous rigs held at five.  By type, horizontal rigs were down five to 1,167, vertical rigs were up two to 625 and directional rigs were up two to 215.

EIA: Storage -81 Bcf to 3.548 Tcf

Another week, another weak storage report.  The weekly EIA working gas in storage report showed an 81 Bcf net withdrawal, bringing the natural gas storage level down to 3.548 Tcf.  The withdrawal was 43% below last year (-143 Bcf) and 34% below the five year average (-122 Bcf).  As a result, the current storage level is now 9.1% above last year (3.251 Tcf) and 13.7% above the five year average (3.12 Tcf).  This, my friends, sucks for natural gas.

Wednesday, December 28, 2011

New Texas Completions

12/8/11 - 12/28/11:

  • Tucker Gas Unit II #1H, XTO Energy: 7.689 MMcf/day IP, 14/64" choke, 5,840 psi; Perfs: 10,806-15,585, length: 4,779 ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: COPELAND, J T, A-136
  • Baker Unit #1H, EOG Resources: 9.106 MMcf/day IP, 16/64" choke, 7,618 psi; Perfs: 15,268-19,694, length: 4,426 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: DE LA CERDA, N, A-14
  • Glaze Unit #1H, EOG Resources: 10.992 MMcf/day IP, 16/64" choke, 8,449 psi; Perfs: 14,441-19,614, length: 5,173 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: DE LA CERDA, N, A-14

Advancing the "Egg": CNG in Lafayette

In talking about building a viable compressed natural gas vehicle market, I've long talked about the "chicken and egg" problem:  people won't use CNG if fueling stations aren't available, but companies won't build fueling stations if the demand isn't there.  Today, I feel like classifying the fueling stations as the "egg" and the vehicles as the "chicken."  That, of course, is subject to change.

Anyway...It looks like Lafayette is helping roll the egg down the field with the addition of two new CNG fueling stations, one operated by the city-parish and another by Apache Corp.  Lafayette has at least 40 municipal natural gas vehicles and is looking to convert additional city buses to the fuel.  Additionally, Lafayette has the largest concentration of fleet vehicles in the state, one of the best potential markets for CNG.

Haynesville Shale Rig Count: -1 to 89

Last week's Haynesville Shale working rig count dropped by another rig to 89.  Louisiana was down one to 57 while Texas held at 32.  For the first time since "Haynesville Shale" has become a household word, Chesapeake Energy does not have the most working rigs in the play.  It is currently tied with EXCO Resources at 15.  Chesapeake's rig count has fallen of significantly over the past six months (as expected).  Just six months ago, the company was averaging 34 working rigs in the play.  Over that same period, EXCO was averaging 20.



Tuesday, December 27, 2011

New Texas Permits

Only two new Texas Haynesville Shale permits from 12/8 to 12/23:

  • Lout Unit #1HR, EOG Resources; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: MOSS, J , A-189
  • Rusk 593 A #1H, BP America; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: RUSK, CSL, A-593

Thursday, December 22, 2011

Floyd Wilson at it Again

It didn't take long.  Former Petrohawk CEO Floyd Wilson has landed as CEO and part owner of RAM Energy Resources after teaming with other investors to buy a majority stake in the company.  Wilson left Petrohawk after BHP Billiton acquired the company earlier this year.

Wilson built up Petrohawk through acquisitions and aggressive spending before selling out for $12.1 billion to the Australian mining giant.  Look for a similar game plan at RAM - which will change its name to Halcon Resources Corp. - as the company will target oil in the Mississippian play in Oklahoma.

NG Price Outlook Still Gloomy

I've always considered prognosticating the future price of anything to be a fool's errand, but it doesn't stop analysts from lining up to put forth their best guess.  In a survey of gas analysts by Bloomberg, most believe that natural gas prices will continue their steady decline from 2008 and be lower in 2012 than 2011, with most analysts predicting average prices below $4/MMBtu next year.

The bottom line is that production continues to increase even though there are fewer and fewer gas-targeted rigs operating.  The good news is that demand is starting to pick up in the manufacturing and industrial sectors, but it is not at the pace of increasing supply, which will continue to put downward pressure on price.  A slow economic recovery just can't keep up with production increases.  Also good news is increased export activity to Canada, although not enough to make a huge difference in the oversupply picture.

New Louisiana Completions

The LA DNR has been slow to report completions in the past few weeks, so these are from the Shreveport Times:

  • L Parker 10-15-9 H #1, QEP Resouces: 8.128 MMcf/day IP on 14/64 in. choke at 8,600 psi; Perfs: 12,625-17,045, length: 4,420 ft.; Alabama Bend Field, Bienville Parish, S10/T15/R9; res. A, serial #241454
  • Warren 2-11-12 H #1, Chesapeake Operating: 13.107 MMcf/day IP on 22/64 in. choke at 7,240 psi; Perfs: 12,470-16,672, length: 4,202 ft.; Ten Mile Bayou Field, DeSoto Parish, S2/T11/R12; res. A, serial #242999

U.S. Rig Count: -11 to 2,008

The weekly Baker Hughes rig count showed an 11 rig decrease in the U.S., bringing the number of working rigs down to 2,008.  Oil rigs were up five to 1,201, gas rigs were down 16 to 802 and miscellaneous rigs held at five.  By type, horizontal rigs were down 12 to 1,172, vertical rigs were up one to 623 and directional rigs held at 213.

EIA: Storage -100 Bcf to 3.629 Tcf

The weekly EIA working gas in storage report showed a 100 Bcf decrease, bringing the natural gas storage level to 3.629 Tcf.  The net withdrawal was considerably lower than last year (-181 Bcf) and the five year average (-140 Bcf).  As a result of the weak injection, the current storage level continues to lag last year (+6.9% or 235 Bcf) and the five year average (+11.9% or 387 Bcf).  The red line on the chart below tells the story - not a good way to start the winter season.

Wednesday, December 21, 2011

Haynesville Rig Count Continues to Decline

Last week's Haynesville Shale rig count showed a three rig decline to 90.  Louisiana was down two to 58, while Texas was down one to 32.  The current rig count is only 49% of the peak reached in July 2010.

In terms of trends, Panola Co has shot to second place in Texas with seven rigs, its highest total since August 2010 (back when seven working rigs was only good enough for fourth place in Texas). On the downside, Shelby Co. is down to three rigs from a high of 20 in May 2010.  In Louisiana, DeSoto and Red River Parishes (43 rigs combined) represent 74% of all working Haynesville rigs in Louisiana, the highest this percentage has been since I first started compiling the rig count in January 2010.



Friday, December 16, 2011

U.S. Rig Count: +32 to 2,019

The weekly Baker Hughes U.S. rig count showed a 32 rig increase to 2,019.  Oil rigs were up 35 to 1,196, gas rigs were down two to 818 and miscellaneous rigs were down one to five. By type,  horizontal rigs were up 33 to 1,184, vertical rigs were up three to 622 and directional rigs were down four to 213.

Thursday, December 15, 2011

New Louisiana Completions

  • Blanchard et al 15 H #1, Petrohawk Operating: 5.453 MMcf/day IP on 14/64 in. choke at 6,374 psi; Perfs: 10,963-15,324, length: 4,361 ft.; Greenwood-Waskom Field, Caddo Parish, S15/T17/R16; res. A, serial #242826
  • W K Cupples 1-15-12 H #1, QEP Resouces: 10.012 MMcf/day IP on 16/64 in. choke at 8,025 psi; Perfs: 11,596-15,527, length: 3,931 ft.; Elm Grove Field, Caddo Parish, S11/T15/R12; res. A, serial #241169
  • Ray P Oden 36 H #5-ALT , El Paso: 18.367 MMcf/day IP on 18/64 in. choke at ? psi; Perfs: 12,089-16,509, length: 4,420 ft.; Holly Field, DeSoto Parish, S36/T14/R14; res. A, serial #242734

EIA: Storage -102 Bcf; Still Lagging Averages

The weekly EIA working gas in storage report showed a 102 Bcf net withdrawal last week, bringing the current storage level down to 3.729 Tcf.  The weekly withdrawal was 34% below last year (-154 Bcf) and 28% below the five year average (-142 Bcf).  As a result, the current storage level is now 4.3% higher than last year and 10.3% above the five year average.


Since September, storage levels have been creeping up to record levels, and with the slow start to the withdrawal season it will be hard for storage levels to get back to average without a protracted cold snap.

Tuesday, December 13, 2011

Exxon Still Sees Bright Future for Gas

Exxon released its annual Outlook for Energy report yesterday (press release, link to report dowload page).  The company continues to see natural gas as an ascendant fuel for the first half of the 21st century.  Much of this growth will come at the expense of coal, which is expected to peak in 2025 and decline 10% by 2040.  Look at the red bars versus the orange bars on the table below.


Exxon uses the Outlook report as a strategic planning tool to direct its investments in directions of the greatest long-term benefit.  Energy super-majors like Exxon and Royal Dutch Shell have the financial resources to be able to look at the distant horizon while scrappy independents suddenly are busy chasing oil and liquids to build cash flow and appease investment analysts.

Monday, December 12, 2011

Haynesville Shale Rig Count: -4 to 93

The Haynesville Shale rig count dropped by four last week, bringing the number of working rigs to 93. Louisiana was down four to 60, while Texas held at 33.



Friday, December 9, 2011

New Texas Permits

11/29/11 - 12/7/11:

  • Longhorns (SL) DU #4H, XTO Energy; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: YBARBO, JI, A-60
  • Longhorns (SL) DU #4HB, XTO Energy; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: YBARBO, JI, A-60
  • Thomas Oliver Unit #3H, EOG Resources; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: DE TORRES, P, A-55

U.S. Rig Count: Gas Rigs Down Big

The weekly Baker Hughes U.S. rig count showed a six rig decrease, bringing the total number of working rigs to 1,987.  Oil rigs were up 29 to 1,161, gas rigs were down 36 to 820 and miscellaneous rigs were up one to six.  By type, horizontal rigs were down five to 1,151, vertical rigs were down one to 619 and directional rigs held at 217.

Thursday, December 8, 2011

New Texas Completions

11/29/11 - 12/7/11:

  • Wilma Jean Unit #1H, EOG Resources: 10.516 MMcf/day IP, 16/64" choke, 8,183 psi; Perfs: 14,026-18,938, length: 4,912 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: MORA, JM, A-827
  • Steve Unit #1H, EOG Resources: 9.463 MMcf/day IP, 16/64" choke, 8,183 psi; Perfs: 14,986-19,204, length: 4,218 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: MORA, JM, A-827
  • Park SU #1H, EXCO Operating: 10.737 MMcf/day IP, 14/64" choke, 9,441 psi; Perfs: 13,837-19,108, length: 5,271 ft.; Carthage Field (Haynesville Shale), San Augustine Co., Survey: PARKS, JB, A-227

No New Louisiana Completions This Week

Look for a bumper crop next week...

EIA: Storage -20 Bcf to 3.831 Tcf

The weekly EIA working gas in storage report showed a 20 Bcf net withdrawal, bringing the level of natural gas in storage down to 3.831 Tcf.  This is a meager withdrawal compared to last year (-81 Bcf) and the five year average (-66 Bcf).  The current storage level is now 2.7% above last year and 8.7% above the five year average.

At this time of year the withdrawals should be more significant.  The path of the red line on the chart below tells the sad story better than a thousand words.

Tuesday, December 6, 2011

Comstock Revises Haynesville Capex

As part of an announcement yesterday about a new leasehold acquisition in west Texas, Comstock Resources revised its capital budget for 2012 and cut some money out of its Haynesville Shale program.  This news shows two trends clearly: 1) continued diminished spending in the Haynesville Shale and 2) the shift by independents towards oil and liquids because of the low gas price environment.

Comstock now plans to spend approximately $545.0 million in 2012 for drilling and completion activities. That figure includes $88.2 million (16% of the total) in the East Texas/North Louisiana region to drill 32 wells (11.3 net), of which 31 (10.6 net) will be Haynesville or Mid-Bossier shale wells.  The company has also allocated $65.0 million to complete 17 wells (14.7 net) drilled in 2011.

Monday, December 5, 2011

Haynesville Shale Rig Count: -5 to 97

For the first time since I began compiling a detailed rig count of the Haynesville Shale in December 2009, the rig count for the play dropped below 100.  This week, the count dropped by five rigs to 97.  There were six fewer working rigs in Louisiana, bringing the count to 64, while there was one new rig in Texas, bringing the count there to 33.  This decrease is hardly a surprise, and it continues the decline we've seen since the count peaked in July 2010.



Friday, December 2, 2011

U.S. Rig Count: -7 to 1,993

The weekly Baker Hughes U.S. rig count showed a seven rig decrease, bringing the number of working rigs to 1,993.  Oil rigs increased by two to 1,132, gas rigs decreased by nine to 865 and miscellaneous rigs held at five.  By type, horizontal rigs were up one to 1,156, vertical rigs were down 12 to 620 and directional rigs were up four to 217.

Thursday, December 1, 2011

New Louisiana Completions

I have updated the spreadsheets and maps for the past two weeks.
  • Weyerhaeuser 10 H #1, Petrohawk Operating: 2.072 MMcf/day IP on 14/64 in. choke at 6,828 psi; Perfs: 11,210-15,766, length: 4,556 ft.; Lake Bistineau Field, Bienville Parish, S15/T16/R10; res. A, serial #242109
  • Wimberly 28-16-9 H #1, QEP Resouces: 7.523 MMcf/day IP on 16/64 in. choke at 6,775 psi; Perfs: 11,580-16,140, length: 4,560 ft.; Lake Bistineau Field, Bienville Parish, S35/T16/R9; res. A, serial #242630
  • Nguyen 32-16-14 H #1, Chesapeake Operating: 15.166 MMcf/day IP on 22/64 in. choke at 6,587 psi; Perfs: 11,597-16,038, length: 4,441 ft.; Caspiana Field, Caddo Parish, S32/T16/R14; res. A, serial #242019

GMX Hints at Deep Oil in Texas Again

In a press release yesterday to announce the $50 million sale of a volumetric production payment (VPP) transaction for producing Haynesville acreage in Harrison and Panola Counties, TX with EDF Trading North America, a U.S. subsidiary of French utility EDF, S.A., GMX specifically noted, "GMXR will retain all of its oil and NGL production associated with the VPP interests and all of its undeveloped locations."

Since the deal was for the production associated with the Haynesville layer, this reader's natural assumption is that GMX is hinting at the possibility of deep oil in this area.  The wording is a bit murky because it could be referencing shallow oil, but that wouldn't have been part of the deal anyway since it is for Haynesville production.  Is this a case of imprecise writing or investor teasing?

EIA: Storage -1 Bcf to 3.851 Tcf

The EIA working gas in storage report showed its first net withdrawal of the season this week.  Unfortunately, it was only 1 Bcf, bringing the total gas in storage to 3.851 Tcf.  This withdrawal is 18 Bcf lower than last year (-19 Bcf) and 28 Bcf below the five year average (-29 Bcf).  The current storage level is now 1.1% above last year (3.81 Tcf) and 7.3% above the five year average (3.619 Tcf).

Tuesday, November 29, 2011

Oil Rumor List Pared Back

It's been a while since I've updated the Texas oil rumor list, so I took a crack at it this afternoon.  The list is my attempt to aggregate wells subject to rumors that the operator might be drilling for an oil target below the Haynesville Shale.  Various parties feel passionately conflicted on the subject.  I am neutral, but I find it interesting nevertheless.

Since I last updated the list in July, there have been 11 completions of rumored wells.  But...all of the wells in question were completed at vertical depths above the Haynesville Shale, so I removed them from the list.  I also removed a couple of others with similar characteristics.  What is left is a handful of wells that are still suspicious.  I think the majority are one day to fall of the list, but I'll reserve judgement until I have more concrete evidence.  The pared back list is under the "Oil Rumor" tab at the top of the page.

New Texas Permits

11/18/11 - 11/28/11:

  • Thomas Oliver Unit #2H, EOG Resources; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: DE TORRES, P, A-55
  • George Unit #1H, EOG Resources; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: CHIRINO, JA, A-17
  • New Horizons #P 1H, XTO Energy; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: KNOLL, P , A-375

New Texas Completions

11/18/2011 - 11/28/2011:
I'm glad I didn't rush home from my Thanksgiving trip to publish this batch of unimpressive completions, all of which are vertical completions.

  • Risinger P GU #1, Southwestern Energy: .211 MMcf/day IP, 20/64" choke, 990 psi; Perfs: 12,154-12,549, length: 395 ft.; Carthage Field (Haynesville Shale), Shelby Co., Survey: ROWE, J , A-585
  • Wynn Trust H #1, Southwestern Energy: .41 MMcf/day IP, 18/64" choke, 990 psi; Perfs: 12,220-12,669, length: 449 ft.; Carthage Field (Haynesville Shale), Shelby Co., Survey: ROWE, J , A-585

New Louisiana Completions From Last Week

I'll update the spreadsheets and maps after posting another new batch of completions later this week.

  • Sustainable For 14 H #1, Petrohawk Operating: 4.656 MMcf/day IP on 14/64 in. choke at 6,380 psi; Perfs: 10,720-15,355, length: 4,635 ft.; Lake Bistineau Field, Bienville Parish, S11/T16/R10; res. A, serial #241639
  • Schmidt 5-16-10 H #1, Chesapeake Operating: 8.52 MMcf/day IP on 22/64 in. choke at 5,353 psi; Perfs: 11,704-16,927, length: 5,223 ft.; Elm Grove Field, Bossier Parish, S4/T16/R10; res. A, serial #243431

Saturday, November 26, 2011

Haynesville Shale Rig Count: -2 to 102

The weekly Haynesville Shale rig count dropped by two to 102.  Louisiana decreased by five to 70, while Texas increased by three to 32.



U.S. Rig Count: -1 to 2,000

The weekly Baker Hughes U.S. rig count showed a one rig decrease to 2,000.  Oil rigs were up five to 1,030, gas rigs were down six to 865 and miscellaneous rigs held at five.  By type, horizontal rigs were up eight to 1,155, vertical rigs were down nine to 632 and directional rigs held at 213.

Wednesday, November 23, 2011

EIA: Storage +9 Bcf to 3.852 Tcf

Thw weekly EIA working gas in storage report showed a 9 Bcf increase from last week's revised level to 3.852 Tcf. The level is only 2 Bcf above the pre-revised level reported last week. The weekly injection was 16 Bcf higher than both last year and the five year average (both a net withdrawal of 7 Bcf).  The current level is 23 Bcf higher than last year and 233 Bcf higher than the five year average.

KKR + $7.2 Billion = Samson Resources

Private equity company KKR announced today that it is leading a group that has struck a deal to acquire the majority of Samson Resources' assets for $7.2 billion. Only Samson's Gulf Coast and Gulf of Mexico properties were excluded from the deal because they would be more attractive to larger producers than a PE company. The transaction does include Samson'S Haynesville Shale properties.

Saturday, November 19, 2011

Happy Thanksgiving!

I wanted to wish everyone a terrific Thanksgiving.  I'll be traveling this week, so this space will be relatively silent until next weekend.

Each year at Thanksgiving, I try to reflect on the things for which I am thankful.  But it always seems to come back to the people, not things, that I truly value.  Nobody gets to be who or what they are without the support and influence of the those around them.

And while I'm giving thanks, I want to thank all the folks who read this site, especially those who offer their thoughts (and occasional criticism).  I created this site for myself, but I am glad that so many others find the information helpful. Happy Thanksgiving to you all!

Haynesville Shale Rig Count: -3 to 105

The weekly Haynesville Shale rig count dropped by three this week to 105.  The count was up one in Louisiana to 76 but down four in Texas to 29.



XTO to Start Drilling in Morehouse Parish

For fans of the Smackover Brown Dense in Louisiana, look for the XTO well ExxonMobil 2H #1 to start drilling in Morehouse Parish at the beginning of this week with a total permitted depth of 13,000 feet.

Friday, November 18, 2011

U.S. Rig Count: -15 to 2,001

The Baker Hughes U.S. rig count declined by 15 rigs to 2,001 this week.  Oil rigs were down eight to 1,125, gas rigs were down six to 871 and miscellaneous rigs were down one to five.  By type, horizontal rigs were down five to 1,147, vertical rigs were up eight to 641 and directional rigs were down 18 to 213.

Thursday, November 17, 2011

EXCO Releases 2012 Capital Budget

Today, EXCO Resources announced its 2012 capital budget.  The company will spend $710 million on capital projects, $585 of which will be devoted to well drilling and completion.  Of that $585 million, 79%, or $460 million, will be devoted to the Haynesville Shale.  The 2012 capex budget should cover 98 gross Haynesville operated wells (30.3 net), a small net number of non-operated wells and some completions activity related to 2011 drilling.

Next year, the company will run 13 rigs in the Haynesville Play, a decrease from the 18 to 20 rigs it ran in 2011.  EXCO will devote eight of the rigs to the Holly Field in DeSoto and Caddo Parishes and focus on concentrated development using multi-well pads on an 80 acre spacing basis.  The remaining five rigs will drill in the Shelby Trough area of Nacogdoches, San Augustine and Shelby Counties, where the company is still delineating acreage and testing well spacing.  HBP activity should be completed in 2012.

QEP Details Capital Spending

QEP Resources held its analyst day on Monday and provided details about 2012 and the company's strategy (presentation for southern region, Haynesville starts on page 15).  As indicated last month, the company will see a "significant Haynesville capex (capital expenditure) reduction until gas prices improve.  As with nearly every other domestic producer, QEP will focus on oil and liquids in the near future.  The company expects liquids to rise from 11% of the company's production in 2010 to 20% in 2012.

In the past two years, QEP has budgeted $410 million for capital spending in the Haynesville. In 2012, that figure will drop to $290 million.

Management also spent time explaining Haynesville well economics.  QEP is seeing well costs come down to an average of $9.1 million.  The company is still quite high on the restricted choke technique in which initial production rates are limited to help boost ultimate recoveries.


QEP is booking estimated ultimate recoveries at 6.1 Bcf and with the restricted choke technique is seeing initial decline rates of around 50%, which is considerably better than the 80% companies were seeing in past years.


Bottom line is that the Haynesville represents a very big gas play for QEP, but now that it is no longer trying to hold leases in Louisiana the company is patient enough to let it ride with a lesser capital investment until gas prices improve.

New Texas Permits

11/9/11 - 11/17/11:

  • Thomas Oliver Unit #1H, EOG Resources; Carthage Field (Haynesville Shale), Nacogdoches Co. Co., Survey: DE TORRES, P, A-55
  • Cornelius Evans #7H, XTO Energy; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: HILL, C/KIRBY, JH, A-972
  • Matthews Unit #1H, EOG Resources; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: MOSS, J , A-189
  • Harry GU SLB #1H, Chesapeake Operating; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: TUCKER, JB, A-721

Recent Texas Completions

11/9/11 - 11/17/11:
  • Blackbird GU #1H, Samson Lone Star: 1.633 MMcf/day IP, 8/64" choke, 2,600 psi; Perfs: 17,798-18,451, length: 653 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: YBARBO, JI, A-60
  • Grizzlies DU #1H, XTO Energy: 8.311 MMcf/day IP, 18/64" choke, 9,422 psi; Perfs: 13,790-20,212, length: 6,422 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: YBARBO, JI, A-60
  • Jenkins Unit #1H, EOG Resources: 9.401 MMcf/day IP, 15/64" choke, 8,694 psi; Perfs: 15,000-19,755, length: 4,755 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: DE TORRES, P, A-55

EIA: Storage +19 Bcf to 3.85 Tcf

The weekly EIA working gas in storage report showed a 19 Bcf increase, bringing the total storage level to 3.85 Tcf.  The current level is a record high, unfortunately not the kind of record that the gas industry wants to be setting.  The weekly injection was 20 Bcf higher than last year and 9 Bcf higher than the five year average.  The current storage level is 0.4% higher than last year (the first time it's been higher since March 2011) and 6.2% higher than the five year average.


Temperatures last week were normal, only 0.3 degrees below average.

More New Louisiana Completions

Maps and spreadsheets are now updated with current information.
  • Red Oak Timber 7 #1-ALT, EXCO Operating: 1.799 MMcf/day IP on 20/64 in. choke at 1,200 psi; Perfs: 14,355-16,530, length: 2,175 ft.; Bethany Longstreet Field, Caddo Parish, S6/T14/R15; res. A, serial #241779
  • BSMC LA 19 HZ #1, Comstock Oil & Gas: 6.57 MMcf/day IP on 14/64 in. choke at 6,932 psi; Perfs: 11,730-16,121, length: 4,391 ft.; Benson Field, DeSoto Parish, S16/T10/R14; res. A, serial #242727
  • Sustainable Fst 17 #1, SWEPI, LP: 16.129 MMcf/day IP on 22/64 in. choke at 7,805 psi; Perfs: 12,366-16,851, length: 4,485 ft.; Oxford Field, DeSoto Parish, S17/T11/R12; res. Jur-A, serial #242521

Wednesday, November 16, 2011

BHP Billiton Makes the Case for Shale

BHP Billiton, the Australian company that acquired Petrohawk a few months ago, released an investor document earlier this week that makes a very articulate case for shale gas.  The presentation (see pages 7 to 27) gives an excellent graphical overview of the technology behind shale and proceeds to talk about what scares people abut hydraulic fracturing.  It ends by making a compelling argument for shale gas in North America.  If you are at all foggy about the process, it's a very illuminating and relatively quick read.

Tuesday, November 15, 2011

Going Down, Down, Down

The Henry Hub spot price for natural gas has taken a tumble in recent months and especially in the past few days.  While the price has sucked wind for the past three years and has been lower than the current level during that time, the price has dropped 11.6% since last Wednesday.  It closed at $3.13/MMBtu this afternoon.


Low commodity prices are common this time of year while the market waits for storage levels to be drawn down instead of increased.  I'm sure the price drop has everything to do with the upcoming storage report, which probably will record a new record high, and the relatively mild weather across the country, which is not likely to be a big draw on storage levels, but it is still nauseating to watch.  The current price actually makes $4/MMBtu actually look attractive, and that's pretty hard to do.

Recent DeSoto Parish Completions

The biggest contributor to the huge number of new Louisiana completions last week was DeSoto Parish.  I have broken out these completions below.

  • Evans 10-10-14 H #1, Chesapeake Operating: 15.022 MMcf/day IP on 22/64 in. choke at 6,220 psi; Perfs: 12,069-16,061, length: 3,992 ft.; Benson Field, DeSoto Parish, S10/T10/R14; res. A, serial #242683
  • Roger Bierden 14 H #1, Encana Corp.: 0.889 MMcf/day IP on 14/64 in. choke at 2,766 psi; Perfs: 14,032-14,252, length: 220 ft.; Redoak Lake Field, DeSoto Parish, S14/T11/R10; res. A, serial #241146

Non-DeSoto Louisiana Completions

I mentioned last week that there were a flood of new Louisiana Haynesville Shale completions. In an effort to present them in more easily digestible chunks, I first listed the Encana "hub" completions (last week).  Here are all of the recent completions that were not in DeSoto Parish:

  • P Conly 19 H #1, QEP Resouces: 13.898 MMcf/day IP on 18/64 in. choke at 8,550 psi; Perfs: 12,610-17,100, length: 4,490 ft.; Woodardville Field, Bienville Parish, S19/T15/R9; res. non-unitized, serial #241315
  • Holley 4-15-10 H #1, QEP Resouces: 11.37 MMcf/day IP on 16/64 in. choke at 8,950 psi; Perfs: 12,385-16,945, length: 4,560 ft.; Alabama Bend Field, Bienville Parish, S9/T15/R10; res. A, serial #242025

Monday, November 14, 2011

Haynesville Shale Rig Count Unchanged at 108

The weekly Haynesville Shale rig count was unchanged last week at 108.  Louisiana was down one to 75, while Texas was up one to 33.



Friday, November 11, 2011

U.S. Rig Count: -10 to 2,016

The weekly Baker Hughes count of working rigs in the U.S. showed a ten rig decrease, bringing the total to 2,016.  Oil rigs were up 21 to 1,133, gas rigs were down 30 to 877 and miscellaneous rigs were down one to six.  Over the past two weeks, oil rigs are up by 57 and gas rigs are down by 55.  By type, horizontal rigs were down five to 1,152, vertical rigs were up seven to 633 and directional rigs were down five to 233.

Thursday, November 10, 2011

Encana: Resource Play Hub - New Completions

This week, Encana discussed its Resource Play Hub concept, also known as the gas factory, in a Haynesville-centered conference call.  Coincidentally, or not, the company reported a slew of completions in the vicinity of its experimental Haynesville pilot hub in Sec. 27/Township 14/Range 11 (ten new completions are listed at bottom of post).  The company drilled eleven wells to test the section, experimenting with 40 acre and 80 acre spacing.  The initial production rates of the eleven wells exceeded 200 MMcf/day - not too shabby.

From Encana's presentation:

Here is a Google map of the Encana completions in this area (not all are Sec. 27) and what it looks like on the satellite image:



TONS of New LA Completions

This week, there were nearly 70 new Louisiana completions (plus a few archived ones that I'll be adding), so I'll have to introduce them in pieces over the next several days.  Bear with me, please.

EIA: Storage +37 Bcf to 3.831 Tcf

The weekly EIA working gas in storage report showed a 37 Bcf increase, bringing the total gas in storage to 3.831 Tcf.  That figure is only 9 Bcf below the all-time record set last year at this time.  The weekly injection was 42% greater than last year and 61% above the five year average.  The current storage level is only 6 Bcf below last year and 215 Bcf above the five year average.


Temperatures last week averaged 2.1 degrees cooler than average and 2.3 degrees cooler than last year.

Wednesday, November 9, 2011

Encana Haynesville Conference Call

One thing I like about Encana is that they do a Haynesville-centric investor presentation once per year.  It is usually full of good information about the company's efforts and the play itself.  This year is no exception, as the company expounds upon its "resource play hub" concept where it drills multiple wells from a single location  (formerly known as the "gas factory" but maybe that elicited too many juvenile comments).  Encana is one of several companies that have been working in the Haynesville on multiple wells from a single pad and it's good to see some tangible results.

I'll be posting some information from the presentation over the next few days, but here are the direct links to Encana's materials, including the presentation, the webcast, a transcript of the webcast and a self-promotional video tour of the company's Haynesville operations (WMV, MP4).  There is lots of good stuff in there, including a discussion of new demand drivers in the southeast (GTL plant in Lake Charles, LNG export and new natural gas power plants) and a little more on the Mid-Bossier.

Decreased Permit Activity in Texas (Only Two New Ones This Week)

There were only two new Haynesville Shale drilling applications filed in Texas over the past week (11/2/11 - 11/8/11), and both are to be drilled on the same well pad.  Since permits are a leading indicator of drilling activity (although not perfectly correlated), this appears to be a negative sign for the Haynesville Shale.

But it is always dangerous to extrapolate a trend from a single data point, so I looked back over the past thirteen weeks of Haynesville permits.  Over that period, there were 5.3 new permits per week.  Looking back over the past six weeks, that number dropped to 4.4 new permits per week.  That may be a sign of slowing activity.

New Texas Completions

11/2/11 - 11/8/11:
  • Holt-BH-BW-Allocation #1H, GMX Resources: 6.338 MMcf/day IP, 18/64" choke, 5,804 psi; Perfs: 11,125-17,659, length: 6,534 ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: MAXIMILLIAN, J , A-444 
  • Columbus #1H, SM Energy: 12.416 MMcf/day IP, 20/64" choke, 9,000 psi; Perfs: 13,850-19,501, length: 5,651 ft.; Carthage Field (Haynesville Shale), San Augustine Co., Survey: I&GN RR CO, A-392 
  • Stedham SU #2H, EXCO Operating: 11.789 MMcf/day IP, 20/64" choke, 6,655 psi; Perfs: 14,729-18,268, length: 3,539 ft.; Carthage Field (Haynesville Shale), San Augustine Co., Survey: JONES, N, A-175

Monday, November 7, 2011

More Benefits of Shale

In an editorial in the New York Times last week, conservative columnist David Brooks expounded upon the "blessings" of the shale gas revolution in the U.S.  It's a good article that gives an overview of shale gas and talks about the current politics and issues.  Among the issues Brooks notes is the impact that shale gas has made upon the chemical and manufacturing industry.  I think this issue has been overlooked as a positive impact of shale gas.

Before shale gas extraction became feasible, chemical companies were closing U.S. facilities and relocating them offshore where natural gas prices were lower.  Now that feedstocks look to be cheaper for a long time to come, we are slowly starting to see new investment in facilities in the U.S.  This means lots of capital spending and jobs, both in construction and operations.  These are good jobs that were evaporating five years ago.

No stimulus, no subsidies, no bailouts, just market-driven jobs and investment.

Louisiana Finally Looking Harder at CNG

A handful of Louisiana officials met recently with natural gas industry representatives to look at the possibility of creating better fueling infrastructure for compressed natural gas (CNG).  The meeting took place in October and was led by Public Service Commission chairman Jimmy Field.

This effort seems natural given the large quantities of gas produced in Louisiana, but it will inherently not be market-driven endeavor and likely will require government-driven economic incentives, which are not politically popular in the country these days.  Looking at a short list of officials in attendance, all were Republicans (I'm not sure there are any Democrats left in Louisiana these days), so the good news is that any effort to create CNG infrastructure likely won't involve a partisan battle.

Sunday, November 6, 2011

Haynesville Shale Rig Count: -1 to 108

The weekly Haynesville Shale rig count was down one rig to 108.  The count was down one in Louisiana to 76 and unchanged in Texas at 32.



Friday, November 4, 2011

Dealin' Chesapeake at it Again

This week, Chesapeake Energy announced that it has signed a letter of intent with "an undisclosed international major energy company" for a joint venture in the Utica Shale in eastern Ohio. The deal gives the new investor a 25% interest in around 650,000 net acres in the wet gas area of the play.  The acreage is currently owned by Chesapeake (570K net acres) and EnerVest, Ltd. (80K net acres).  The deal values the acreage at $15,000 per net acre, and will yield $2.438 billion to CHK and EnerVest. CHK's $2.14 billion proceeds will be paid $640 million in cash at closing and $1.5 billion in carried drilling and completion cost.

The company also announced a transaction to sell up to $750 million of preferred shares for acreage the company owns in the Utica Shale.  You can read all about it (starting in paragraph four) because it just wears me out to try to understand and explain Chesapeake's funding deals.

U.S. Rig Count: +5 to 2,026

The weekly Baker Hughes U.S. rig count showed a five rig increase, bringing the number of working rigs to 2,026.  Oil rigs were up 34 to 1,112, gas rigs were down 27 to 907 and miscellaneous rigs were down two to seven.  By type, horizontal rigs were up two to 1,157, vertical rigs were up three to 626 and directional rigs were unchanged at 243.

Thursday, November 3, 2011

No New Louisiana Completions This Week

But I posted updated spreadsheets and maps bringing all data current.

EIA: Storage +78 Bcf to 3.794 Tcf

The weekly EIA working gas in storage report showed a 78 Bcf net injection, bringing the total amount of gas in storage to 3.794 Tcf.  The weekly injections continue to surpass the previous year (+67 Bcf) and the five year average (+35 Bcf).  The current storage level is only 17 Bcf lower than last year, while being 201 Bcf higher than the five year average.


Normally, this time of  year the injection season is winding down, but current activity seems to indicate otherwise. Temperatures last week averaged 1.1 degrees warmer than normal, but 3.7 degrees cooler than last year.  With a strong burst of cold weather this week, the momentum might shift, but at this point the current storage level is only 46 Bcf lower than the record high storage level of 3.84 Tcf achieved in 2010.  While this is lower than the demonstrated peak capacity of 4.103 Tcf (reported by the EIA as of April 2011), it is nevertheless a concerning level.

Two Sides of the Quake

England's pursuit of shale gas hit a roadblock a few months back when two minor earthquakes (2.3 and 1.5 on the Richter scale) around Blackpool were attributed to the hydraulic fracturing of Caudrilla Resources' Preese Hall-1 gas well.  Caudrilla ceased fracking operations at the well and performed a study to determine the cause of the seismic activity.  In a press release yesterday, the company said that it found that it was "highly probable" that the fracking operations triggered some seismic events.  But the study also found that it was an "extremely rare" set of geologic circumstances that led to the seismic activity that would be unlikely to reappear in future well sites.

Unfortunately, Caudrilla found the needle in the haystack, and the nascent gas industry in the U.K. and Europe will pay the price.  The findings will fuel the call for bans on fracking in Europe, even though the events are unlikely to repeat themselves.  Will it be enough to derail the pursuit of shale gas?  The U.K. is particularly aware of the need for readily accessible, affordable energy, so the debate will rage on.

Wednesday, November 2, 2011

Forest Oil: Welcome Back!

Forest Oil reentered the Haynesville Shale program in August 2011 with a single rig drilling program.  The company made the decision to come back after months of pleasing results from its 2010 wells, which were produced on a restricted rate.  From the press release:
The seven wells drilled in 2010 have produced at an average rate of 8 MMcfe/d during their first 240 days of production and, at the end of the 240 days, had an average flowing pressure of approximately 4,300 psi. Forest now believes that the estimated ultimate recovery from these wells should exceed the 6.5 Bcfe type curve.
The company also noted that it expects cost reductions and efficiencies to further enhance Haynesville returns.

While one new rig is not big news in and of itself, it is a positive indicator that the Haynesville Play has a bright future.  The only knock on the play is that it produces only dry gas and the commodity price for gas is terrible without much on the near-term horizon to suggest otherwise.  A big knock, yes, but the Haynesville's fundamentals are strong.

Samson and KKR?

Samson Investment has entered into exclusive negotiations with LBO firm KKR to acquire a majority of Samson's oil and gas assets (Bloomberg; Financial Times).  Word is that KKR is proposing a $5 billion investment for majority control of the company, but it would need selling shareholders to provide additional financing in the form of retaining a minority share for the deal to work.  Reports have suggested a valuation of $8-10 billion for these assets.

This deal is in KKR's sweet spot and the deal.  If the deal is consummated, it might might work out very well for the selling Schusterman family as well, giving them two bites at the proverbial apple.  KKR has made several acquisitions of shale assets and turned around to resell them at a higher price in a short time frame, usually to a major producer (i.e. East Resources to Shell, Hilcorp to Marathon).  By my count, KKR is sitting on some Barnett Shale assets.  Might there be some form of packaging to create a larger follow-on deal?  KKR also has a midstream joint venture with El Paso.  Hey, isn't El Paso's E&P business for sale too? Hmmm.

So far, KKR has exhibited a golden touch.  Let's see if that hot streak continues.

Tuesday, November 1, 2011

New Texas Permits

10/21/11 - 11/1/11:

  • LeTourneau Gas Unit 4 #18HH, Anadarko E&P; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: TOBY, T, A-720
  • LeTourneau Gas Unit 4 #27HH, Anadarko E&P; Carthage Field (Haynesville Shale), Harrison Co. Co., Survey: TOBY, T, A-720
  • CGU 9 #53HH, Anadarko E&P; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: SMITH, M, A-607

New Texas Completions

10/21/11 - 11/1/11:

  • Shofner Unit #1H, EOG Resources: 6.756 MMcf/day IP, 16/64" choke, 7,176 psi; Perfs: 14,065-19,256, length: 5,191 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: HOYA, CV, A-280
  • Simpson Unit #1H, EOG Resources: 9.22 MMcf/day IP, 18/64" choke, 7,510 psi; Perfs: 14,088-19,244, length: 5,156 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: HOYA, CV, A-280
  • Red River 575 SU #1HB, EXCO Operating: 15.688 MMcf/day IP, 20/64" choke, 7,172 psi; Perfs: 12,810-17,484, length: 4,674 ft.; Carthage Field (Haynesville Shale), San Augustine Co., Survey: HT&B RR/MILLS, LJ, A-575
  • Timberstar-Blackstone GU 1 #1H, XTO Energy: 2.572 MMcf/day IP, 0/64" choke, 1,300 psi; Perfs: 12,920-16,882, length: 3,962 ft.; Carthage Field (Haynesville Shale), Shelby Co., Survey: ROWE, J, A-585

35 New Louisiana Completions

  • Bundrick Land 27 #1-ALT, Encana Corp.: 21.424 MMcf/day IP on 25/64 in. choke at 7,976 psi; Perfs: 12,680-16,858, length: 4,178 ft.; Red River-Bull Bayou Field, Red River Parish, S34/T14/R11; res. Jur-A, serial #241665
  • LA Minerals 6 #1, SWEPI, LP: 20.349 MMcf/day IP on 24/64 in. choke at 9,180 psi; Perfs: 13,456-17,952, length: 4,496 ft.; Grogan Field, Sabine Parish, S31/T10/R11; res. Jur-A, serial #241778
  • Weyerhsr 28-16-10 H #1, Chesapeake Operating: 15.388 MMcf/day IP on 22/64 in. choke at 6,278 psi; Perfs: 11,858-16,339, length: 4,481 ft.; Lake Bistineau Field, Bienville Parish, S28/T16/R10; res. A, serial #242760

Monday, October 31, 2011

Haynesville Shale Rig Count: -2 to 109

Last week's Haynesville Shale rig count was down by two rigs to 109.  The count in Louisiana was down three to 77, while the count in Texas was up one to 32.  The maps and spreadsheets have been updated for your viewing pleasure.



Friday, October 28, 2011

U.S. Rig Count: +8 to 2,021

The weekly Baker Hughes U.S. rig count showed an eight rig increase to 2,021.  Oil rigs were down one to 1,078, gas rigs were up seven to 934 and miscellaneous rigs were up two to nine.  By type, horizontal rigs were up 13 to 1,155, vertical rigs were down seven to 623 and directional rigs were up two to 243

Thursday, October 27, 2011

QEP to Dial it Back in the Haynesville

QEP Resources (formerly Questar) stated in its quarterly earnings and operations update conference call that with the exception of one section for which it recently became the operator, it has concluded its Haynesville lease retention strategy in north Louisiana.  The company has started drilling 80 acre density pilot programs in several areas to assess the proper density to drill the play.

But management warned that it likely will "dial back activity going forward" in the Haynesville Shale.  The company currently operates six rigs in the play, but expect QEP's attention (and rigs) to shift to some of its acreage in the west that features oil and natural gas liquids. The CEO said that QEP won't go down to zero rigs, but he "would expect a substantial pulldown" in terms of rig count.  The company will continue to invest capital in non-operated wells, and that commitment likely will impact its investment in its own drilling program.

Cheniere Inks Deal with BG for LNG

BG Group of the United Kingdom (and partner with Exco Resources in the Haynesville Shale) signed an LNG export deal with Cheniere Energy to purchase 170.5 Bcf per year of LNG over 20 years, or about half a Bcf per day.  This is the first export deal signed with Cheniere and the first of its kind in the Gulf Coast region.  If all goes as planned, Cheniere's Sabine Pass facility can be exporting natural gas by 2015.

EIA: Storage +92 Bcf to 3.716 Tcf

The weekly working gas in storage report showed a 92 Bcf net injection, bringing the natural gas storage level to 3.716 Tcf.  The weekly injection was 24% higher than last year (+74 Bcf) and 96% greater than the five year average (+47 Bcf).  The current storage level is only 0.7% below last year and 4.4% above the five year average.  After spending most of the year around or below the five year average, current storage levels are now poised to break last year's record high levels.


Temperatures last week averaged 58.0 degrees, which 1.7 degrees warmer than normal and 1.1 degrees warmer than last year.