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.


Anonymous said...

My question is with the lower cost associated with developement drilling, will lower capital budgets really result in that many fewer wells will be drilled. Also with E&P now able to more cherry pick their drilling/developement locations will the growth of NG produced in the HS even slow down?

Robert Hutchinson said...

I think 1) yes and 2) no.

The per well cost hasn't dropped significantly, definitely not more than 10% over the past year or two, while capital spending is decreasing upwards of 30% in 2012. So I think there will be fewer wells drilled because the aggregate dollars are decreasing more than the decrease in the cost of a well.

But your second question hits the mark. I don't think production will plummet with lower capex in the Haynesville Shale. Producers are largely done holding leases, so they don't have to drill marginal wells to lock in leases. When they spend drilling funds, they will focus on the bigger targets and emphasize pad drilling where they can maximize their drilling dollars for a much better return. Production might decline or at least plateau until prices improve, but I don't see it dropping significantly. I wouldn't be surprised to see natgas production continue to increase next year - albeit slowly.