Monday, February 28, 2011

Gasland Fact Checking at NY Times

New York Times/Greenwire published a lengthy fact checking of the documentary "Gasland" last week in anticipation of the Academy Awards.  While not as blistering as "Debunking Gasland" by Energy in Depth, it provides an objective look at the claims made by Josh Fox in his documentary.  Makes for interesting reading as the piece concludes that many of the claims Fox made in the film are at least somewhat exaggerated.  Most interesting that it comes from a publication called "Greenwire" and it appeared just days before the parent paper published a lengthy article critical of shale drilling.

And the Winner is...

Not "Gasland."  Josh Fox's documentary did not win the Oscar last night ("Inside Job" did), but the damage through media exposure has been done regardless.  Coincidentally, yesterday saw a particularly damaging front page story in the New York Times about the impact of wastewater from drilling on Pennsylvania.

The New York Times piece focuses on wastewater from the drilling process, demonizing hydraulic fracturing in a different way than "Gasland," which depended on bad logic and innuendo.  Instead, the Times piece focused on contaminants, especially naturally occurring radioactive elements, that are returned to the surface with the frac water and gas.  Being an investigative piece, the story has a sensational tone to it, but it also lacks some key evidence to draw its conclusions.  Specifically, the story drew conclusions based on pre-treated wastewater.  There was no evidence from downstream post-treatment tests, although testing in several Pennsylvania rivers is underway and results will be released next month.

Friday, February 25, 2011

Big Mid-Bossier Shale Update

I spent some time this week digging into the Mid-Bossier Shale. Because Mid-Bossier wells are not separately delineated by TX or LA, you have to figure them out by finding them referenced in investor materials, looking at depths of completions or talking to someone who knows about these things.  Over the course of the past couple of weeks I did a little of each.  The depth analysis is still a work in process and, not being an expert on such things, I may have mis-characterized some wells.

On top of this, I just realized that I never actually got around to posting the updates I made a couple of weeks ago - my bad.  In any case, I've added 16 new Mid-Bossier candidate wells and have made numerous updates and additions to the spreadsheet, most notably perforation data.  While perforations are not an exact measure of depth, it gives us some data to do an apples-to-apples comparison. Click the image below to go to the Mid-Bossier page.


As always, I welcome any input you may have to help make this list better.

Haynesville Rig Count Delayed...

For some reason, Baker Hughes posted stale data (two weeks old) for east Texas and north Louisiana this week, so at this point there is no reason to update the  Haynesville Shale rig count.  If they resolve the problem I will publish an update.  I'll update the Twitter feed as I find out more.

U.S. Rig Count: -14 to 1,699

The weekly Baker Hughes rig count showed a 14 rig decrease, bringing the total number of working rigs in the U.S. to 1,699.   This is the third consecutive weekly decrease and the current level is 40 rigs lower than the recent high water mark.  Oil rigs were down 15 to 783, gas rigs were up one to 906 and miscellaneous rigs were unchanged at 10.  By type, vertical rigs were down eight, horizontal rigs were down three and directional rigs were also down three.

In the Haynesville Shale region, inclusive of other formations, the rig count was unchanged for the thirds straight week in both north Louisiana (115) and east Texas (56).

Thursday, February 24, 2011

Another Bumper Crop of LA Completions

  • Lee 24 H #1, QEP Energy: 12.217 MMcf/day IP on 15/64 in. choke at 8,100 psi; Perfs: 12,801-17,080, length: 4,279 ft.; Woodardville Field, Bienville Parish, S25/T15/R10; res. non-unitized, serial #240616
  • Conly 28 H #2, QEP Energy: 11.91 MMcf/day IP on 16/64 in. choke at 7,975 psi; Perfs: 12,400-16,750, length: 4,350 ft.; Woodardville Field, Bienville Parish, S26/T15/R10; res. non-unitized, serial #241089
  • Lewis 28-11-13 H #1, Chesapeake Operating: 15.113 MMcf/day IP on 22/64 in. choke at 6,890 psi; Perfs: 12,105-15,279, length: 3,174 ft.; Benson Field, DeSoto Parish, S28/T11/R12; res. A, serial #240379
  • LaBokay 21-11-12 H #1, Chesapeake Operating: 18.055 MMcf/day IP on 22/64 in. choke at 7,915 psi; Perfs: 12,524-16,537, length: 4,013 ft.; Brushy Bayou Field, DeSoto Parish, S21/T11/R12; res. Jur-A, serial #241061

Brown Goes Green

“It’s the only long-term viable option to diesel" 

That was not said by T. Boone Pickens, but it very well could have been.  Instead, the quote comes from UPS's director of maintenance and engineering, referring to the use of natural gas vehicles over diesel for its trucks. The company has added 48 liquefied natural gas long-haul tractors (not compressed natural gas) to its fleet.  Thirty-eight will go to Las Vegas and ten will go to Ontario, CA, where UPS already runs 11 LNG tractors. The 48 new LNG trucks will replace existing diesel trucks, and UPS expects to save 4,000 gallons of diesel fuel per day with the new vehicles.

UPS has long been an innovator in strategies to reduce fuel consumption and pollution with a portfolio of alternative fuel vehicles, including LNG, CNG, propane and various strains of electric vehicles. From 1999 to 2009, UPS drivers have logged 77.3 million more miles but have used 3.2 million fewer gallons of fuel.  Not bad.

EIA: Storage - 81 Bcf to 1.83 Tcf

The weekly EIA working gas in storage report showed an 81 Bcf net withdrawal, bringing the inventory level to 1.83 Tcf.  The weekly withdrawal was far below last year's (-174 Bcf) and the five year average (-148 Bcf), but the current level is still 2.6% below last year's level (2.052 Tcf) and 3.2% below the five year average (-2.039 Tcf).


Temperatures last week in the Lower 48 were warmer than previous averages, with an average of 40.1 degrees.  That's 7.4 degrees warmer than last year and 3.6 degrees warmer than the five year average.

Wednesday, February 23, 2011

Cabot Haynesville Joint Ventures Coming

Cabot Oil & Gas announced its earnings yesterday and will have its conference call this morning.  Of note to Haynesville fans:
"Cabot is close to finalizing three separate agreements with regard to its Haynesville acreage.  The agreements would consist of both a carried interest in certain wells and cash consideration for the sale of certain acreage and production.  These agreements would allow Cabot to maintain approximately two-thirds (22,000 net acres) of its existing position in the play with held by production acreage or by extensions and/or renewals on a limited number of acres.  An expenditure of approximately $5 million in 2011 would perpetuate this acreage with proceeds generated from these transactions."
We will certainly keep an eye on this news.

Lots of New Louisiana Completions

[Updated 2/23/11]
The completions below were sourced from the Shreveport Times

  • Fielder 10-26-15 H #1, Chesapeake Operating: 11.64 MMcf/day IP on 22/64 in. choke at 6,180 psi; Perfs: 11,501-15,939, length: 4,438 ft.; Metcalf Field, Caddo Parish, S10/T16/R15; res. A, serial #241460
  • Hunsicker 12-14-16 H #1, Chesapeake Operating: 13.005 MMcf/day IP on 22/64 in. choke at 6,263 psi; Perfs: 11,825-16,200, length: 4,375 ft.; Bethany Longstreet Field, Caddo Parish, S12/T14/R16; res. A, serial #240910
  • Pasey 5-16-14 H #1, Chesapeake Operating: 15.188 MMcf/day IP on 22/64 in. choke at 6,075 psi; Perfs: 11,449-15,995, length: 4,546 ft.; Metcalf Field, Caddo Parish, S5/T16/R14; res. A, serial #240270

Tuesday, February 22, 2011

I Wish Someone Cared This Much


After putting the kids to bed, I settled in to watch my favorite animated show, Archer, on the old DVR.  The show is a bawdy take on the spy-for-hire story, sort of "Arrested Development" meets James Bond meets "South Park."  Not a show for the young 'uns, but very funny and very un-PC.  This week, Archer was sent to New Orleans to thwart an eco-terrorist who wants to blow up a natural gas pipeline.  As I watched the show, all I could think of is, "I wish people cared that much about natural gas!"

Monday, February 21, 2011

Texas Completions & Permits

Completions:
  • Jarry #1H, Chesapeake Operating: 5.696 MMcf/day IP, 18/64" choke; Perfs: 12,030-17,533, length: 5,503 ft.; Carthage Field (Bossier Shale), Shelby Co., Survey: VANN, NM, A-751
  • Blocker Heirs #14H, GMX Resources: 6.452 MMcf/day IP, 16/64" choke; Perfs: 11,254-16,361, length: 5,107 ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: WILLIAMS, W, A-757
  • Holt #2H, GMX Resources: 7.315 MMcf/day IP, 18/64" choke; Perfs: 11,175-16,461, length: 5,286 ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: MAXIMILLIAN, J, A-444
  • Kurth Investments Unit #1H, EOG Resources: 13.32 MMcf/day IP, 10/64" choke; Perfs: 14,281-19,180, length: 4,899 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: MORA, JM, A-827

Chesapeake Agrees to Sell Fayetteville Shale Assets to BHP Billiton

Boy, that was fast.  Chesapeake Energy announced today that it has agreed to sell its Fayetteville Shale assets to the oil and gas subsidiary of Australian mining giant BHP Billiton, Ltd. for $4.75 billion.  Chesapeake announced a couple of weeks ago its intentions to sell its 487,000 net acres as part of its effort to reduce debt and grow production less rapidly.

The deal also includes Chesapeake's regional midstream assets, which amounts to 420 miles of pipeline.  Also, Chesapeake will provide "essential services for up to one year for BHP Billiton's Fayetteville properties for an agreed-upon fee."  Not sure what that means, but since BHP Billiton doesn't have much of a presence in North America, it will lean on Chesapeake to give it time to build an operation.

Friday, February 18, 2011

Haynesville Shale Rig Count: -1 to 148

The weekly Haynesville Shale rig count dropped by one to 148.  Louisiana held steady at 108 while Texas dropped one to 40.


U.S. Rig Count: -8 to 1,713

The weekly Baker Hughes rig count showed an eight rig decrease, bringing the number of working rigs to 1,713 (although the detailed rig count shows 1,714 rigs).  The number of oil rigs decreased by seven to 798, while the number of gas rigs decreased by one to 905.  The number of miscellaneous rigs was unchanged at ten.  By type, vertical rigs were down ten, directional rigs were down two and horizontal rigs were up four.

In the Haynesville Shale region, inclusive of other formations, the rig count was unchanged at 171, with north Louisiana (115) and east Texas (56) both unmoved.

Goodrich: Shifting Focus Away from the Haynesville

Goodrich Petroleum reported its fourth quarter results yesterday.  I'll spare you the numbers but to say that the Haynesville Shale accounted for 55% of the company's Q4 production and 51% of its 2010 production.  But, in a story that will be repeated frequently, the company's focus is shifting away from the Haynesville this year.  In Goodrich's case, it is shifting to the Eagle Ford Shale, where the company will spend 62% of its planned $235 2011 capital budget.  Only $52 million, or 22%, is reserved for the Haynesville Shale ($28 million in Louisiana and $24 million in the Angelina River Trend area in Texas).  

In its operational update, the company reported three completions that have not yet hit the state systems:

Texas:

  • R. Dean Hay GU #1H, Goodrich Petroleum: 5.7 MMcf/day IP, 20/64" choke; Carthage Field (Haynesville Shale), Shelby Co., Survey: PENNINGTON, S O, A-555
  • R. Dean Hay (SL) GU #2H, Goodrich Petroleum: 8.6 MMcf/day IP, 16/64" choke; Carthage Field (Haynesville Shale), Shelby Co., Survey: PENNINGTON, S O, A-555

Louisiana:

  • Edgar Cason 14 H #1, Goodrich Petroleum: 14.9 MMcf/day IP on 18/64 in. choke at 8,600 psi; Thorn Lake Field, Red River Parish, S11/T14/R11; res. non-unit, serial #242026

Save Us from Josh Fox

Josh Fox, the director of the anti-natural gas propaganda otherwise known as "Gasland" is using the bully pulpit he was handed along with an Oscar nomination to call for a moratorium on the use of hydraulic fracturing.  He is asking President Obama to place a moratorium on the practice just as he did on deepwater drilling after the BP Macondo accident in the Gulf last year, even though there is no proof behind Fox's claims.

Interestingly, I read in the Financial Times that Russian gas giant Gazprom, which is deadly afraid of shale gas eroding its power over gas markets, has looked at ways of helping to promote "Gasland."  What strange bedfellows ambition makes.

I also find it interesting that some environmentalists are coming out against "Gasland," including a recent article in the Huffington Post by Bill Shireman.

Given the disastrous outcome of the previous drilling moratorium, I wouldn't hold my breath that the President will sign on to Fox's plan.  I believe that the President understands the benefits of natural gas, but he has to walk a very narrow path as not to upset the politically powerful coal lobby and to maintain support for R&D funding for alternative energy.  Natural gas is one of the few industries in the U.S. that 1) has grown in recent years, 2) offers a way to reduce both particulate pollution and carbon dioxide levels, and 3) can potentially be a new export product, which is one of the President's priorities.

While Josh Fox has the mic, hes' going to say lots of things to drum up support for his movie and its Oscar bid.  Hopefully he won't get to say them on stage at the Oscars.

Thursday, February 17, 2011

More Louisiana Completions

Below are some additional completions reported this week.  I've updated the completions listed earlier this week with more current information (replacing the "unknown" entries)
  • Cranfield 33 #1, Chesapeake Operating: 15.84 MMcf/day IP on 22/64 in. choke at 6,522 psi; Perfs: 11,845-16,080, length: 4,235 ft.; Caspiana Field, Caddo Parish, S33/T16/R14; res. A, serial #240637
  • Zimmerman 36-15-12 H #1, Chesapeake Operating: 16.321 MMcf/day IP on 22/64 in. choke at 7,382 psi; Perfs: 12,030-16,411, length: 4,381 ft.; Caspiana Field, Caddo Parish, S36/T15/R12; res. B, serial #240846
  • Dupree Land 29 H #1, Petrohawk Operating: 8.619 MMcf/day IP on 14/64 in. choke at 8,822 psi; Perfs: 12,914-17,382, length: 4,468 ft.; Red River-Bull Bayou Field, Red River Parish, S32/T13/R10; res. B, serial #241649

Another CNG Station Coming to Bossier

The Bossier Press-Tribune reported yesterday that a second compressed natural gas station will open in Bossier Parish in May 2011.  The first station opened in October 2010 and is operating at about a 70% utilization rate, supported mainly by fleet vehicles from Chesapeake Energy, Centerpoint Energy and AT&T as well as the occasional CNG bus passing through town.

Balancing the clichés of "if you build it they will come" and the "chicken and egg" dilemma, building new CNG infrastructure is the only way to encourage its use in transportation. Another cliché to consider: "pioneers end up with arrows in their backs."  Running a fueling station can be a dicey economic proposition because the margins can be thin (beer and cigarettes actually drive more profit than gas for most retailers).  But in the case of these new CNG stations I guess it helps if the owner is also the wholesaler.  The article contends that the new station should profitable soon.  The proof of that assertion will be yet another CNG station popping up.

EIA: Storage -233 Bcf to 1.911 Tcf

The weekly EIA working gas in storage report showed another big withdrawal of 233 Bcf, bringing the current storage level down to 1.911 Tcf.  The weekly withdrawal was considerably higher than both last year (-141 Bcf) and the five year average (-128 Bcf).  The current storage level is now 6.9% lower than last year at this time (2.052 Tcf) and 6.3% below the five year average (2.039 Tcf).


A blowup of the spaghetti lines:

Wednesday, February 16, 2011

Another Quiet LA Lease Sale

The monthly Mineral Board lease auction was fairly quiet again this month. Only three parcels prospective for the Haynesville Shale were successfully leased, all in Sabine Parish.  The average lease bonus was $2,819.  The  weighted average bonus was $2,202, but that was weighted down by a large parcel, not all of which is currently located in a Haynesville unit.  Several parcels in central Caddo Parish and another in Sabine received no bids.

1984 All Over Again?

Saw a short article this morning noting that 2010 Louisiana gas production was 2 Tcf, which was around 36% higher than 2009 levels, which were 12.3% higher than 2008. Not surprisingly, around 61% of the production came from the Haynesville Shale. The 2010 production level is now as high as it was back in 1984. Those who remember what happened in the Louisiana energy industry in the mid and late 1980's hope that's where the similarities end.

Tuesday, February 15, 2011

Texas Completion/Activity

Completions:
  • Crane et al #2H, EOG Resources: 10.3 MMcf/day IP, 28/64" choke; Perfs: 15,402-19,042, length: 3,640 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: CHIRINO, JA, A-17
  • Davis #1H, Chesapeake Operating: 9.443 MMcf/day IP, 22/64" choke; Perfs: 12,121-16,012, length: 3,891 ft.; Carthage Field (Haynesville Shale), Shelby Co., Survey: WALKER, ZC, A-757
  • Woods SU #1H, EXCO Operating: 18.986 MMcf/day IP, 18/64" choke; Perfs: 14,555-18,121, length: 3,566 ft.; Carthage Field (Haynesville Shale), San Augustine Co., Survey: PARKS, JB, A-227
  • Nobles #1H, Chesapeake Operating: 4.796 MMcf/day IP, 18/64" choke; Perfs: 12,074-18,409, length: 6,335 ft.; Carthage Field (Haynesville Shale), Shelby Co., Survey: WALKER, ZC, A-757

Monday, February 14, 2011

Recent Louisiana Completions

  • Cottingham et al 24 H #1, Petrohawk Operating: 9.15 MMcf/day IP on 14/64 in. choke at 8,938 psi; Perfs: 12,580-17,140, length: 4,560 ft.; Woodardville Field, Bienville Parish, S25/T15/R9; res. A, serial #241133
  • Ryan 32 H #1, Petrohawk Operating: 6.362 MMcf/day IP on 14/64 in. choke at 8,558 psi; Perfs: 12,750-17,320, length: 4,570 ft.; Alabama Bend Field, Bienville Parish, S5/T15/R9; res. A, serial #240926
  • Conly 28 H #1, Questar: 11.232 MMcf/day IP on 16/64 in. choke at 8,000 psi; Perfs: 12,350-16,700, length: 4,350 ft.; Woodardville Field, Bienville Parish, S28/T15/R10; res. A, serial #240987
  • Cross Creek 20-15-9 H #1, Questar: 11.755 MMcf/day IP on 15/64 in. choke at 8,480 psi; Perfs: 12,650-16,925, length: 4,275 ft.; Woodardville Field, Bienville Parish, S20/T15/R9; res. A, serial #241094

Friday, February 11, 2011

Haynesville Shale Rig Count: +2 to 149

The Haynesville Shale rig count showed very little activity this week (maybe the analysts didn't have time to complete the ArkLaTex area).  The count increased by two to 149, adding two rigs in Louisiana (108) while remaining unchanged in Texas (41).  The spreadsheets and maps have been updated.



U.S. Rig Count: -18 to 1,721

The weekly Baker Hughes rig count showed an 18 rig decrease to 1,721, reversing five weeks of gains.  The oil rig count decreased by 13 (805), the gas rig count decreased five (906) and the miscellaneous rig count was unchanged (10).  By type, vertical rigs were down 13, directional rigs down four and horizontal rigs down one.  Horizontal rigs now represent 56.9% of all U.S. working rigs, the highest level ever.

In the Haynesville area, inclusive of other formations, the rig count increased by one to 171.  One rig was added in north Louisiana (115) and east Texas was unchanged (56).

The specific Haynesville Shale count should be available late this afternoon.

Thursday, February 10, 2011

Recent Louisiana Completions [Updated]

I updated the completions list I posted earlier this week with some updated pressure data, and I corrected a glitch in the perforations data.  Also of note, I've updated the map data for each parish (both Google Maps ad Google Earth) to add a link for each well to take you directly to the well's information page in the LA DNR's SONRIS database.
  • Webb 11-16-14 H #1, Chesapeake Operating: 13.968 MMcf/day IP on 22/64 in. choke at 6,286 psi; Perfs: 11,505-15,989, length: 4,484 ft.; Cedar Grove Field, Caddo Parish, S11/T16/R14; res. A, serial #241091
  • Mamie Elston 13 H #1, Petrohawk Operating: 6.047 MMcf/day IP on 14/64 in. choke at 8,209 psi; Perfs: 11,602-16,165, length: 4,563 ft.; Elm Grove Field, Bossier Parish, S24/T16/R11; res. A, serial #241361
  • A.R. Collins 17 H #1, XTO Energy: 5.5 MMcf/day IP on 20/64 in. choke at 3,070 psi; Perfs: 11,112-15,344, length: 4,232 ft.; Lake Bisteneau Field, Bienville Parish, S17/T16/R9; res. A, serial #240345

EIA: Storage -209 Bcf to 2.144 Tcf

With all the cold weather last week, the weekly EIA accounting of natural gas in storage took another steep drop, this week decreasing 209 Bcf to 2.144 Tcf.  The weekly withdrawal was 16% greater than this week last year (-180 Bcf) and 31% greater than the five year average for this week (-159 Bcf).  The current storage level is 4.4% lower than the same level last year (2.242 Tcf) and 2.1% lower than the five year average (2.189 Tcf).


A closeup of the spaghetti lines above:


Tuesday, February 8, 2011

Somewhere, Matthew Simmons is Smiling

Add Saudi Arabia to the list of folks unhappy with Julian Assange and Wikielaks.  The Guardian newspaper in England revealed today that U.S. diplomatic cables in WikiLeak's possession from representatives in Riyadh, Saudi Arabia reveal a strong belief that Saudi oil reserves are overstated by 40%.  If true, Saudi Arabia would not be able to increase production to keep up with increasing global demand and oil prices could escalate quickly.  The alleged overstatement of Saudi reserves is an old story, but this is a big piece of evidence confirming the belief.

You have to know the peak oil folks are throwing an "I told you so!" party tonight.

Expect Boone Pickens and the CNG folks to chime in about the virtues of natural gas for vehicles too.

Trading Places: Who's Getting Oily, Who's Getting Gassy

One of the big stories in the domestic energy industry over the past year was the "race to liquids" by independent E&P companies who tout their growing positions in oil plays.  Most of these companies are spending big bucks to establish these positions, and they are doing it largely to placate analysts.  It makes some sense when oil is trading at $100 per barrel and gas is staring down $4 per MMBtu, but it is very expensive for a small to mid-sized independent to snap up tens of thousands of acres in a hot new play.  I've often wondered if this herd mentality strategy shift is a wise move.

The interesting flip-side to this story is that the E&P majors are moving from oil towards gas.  Shell, Exxon, BP and others have made big investments in natural gas, specifically shale gas.  There are many reasons, key among them that finding and producing oil in foreign countries is becoming very difficult with the rise of national oil companies and other geopolitical risks.  Don't you think Shell, which expects to produce more gas than oil by 2012, would rather go up against environmentalists in Pennsylvania after its purchase of East Resources than gun toting, pipeline blowin' up militants in the corrupt nation of Nigeria?

Monday, February 7, 2011

Texas Completion/Activity

Note that I am now including perforation lengths (although sometimes not available) and flowing pressures for Texas completions.


Completions:
  • Cougars DU #1, Exxon/XTO: 0.536 MMcf/day IP, 17/64" choke; Perfs: 11,178-11,260, length: 82 ft.; Carthage Field (Haynesville Shale), Shelby Co., Survey: TUTT, C, A-726
  • Jenkins East GU 1 #2H, Berry Oil: 7.348 MMcf/day IP, 20/64" choke; Perfs: NA-NA, length: NA ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: CARROL, E, A-135
  • Jenkins East GU 1 #3H, Berry Oil: 7.193 MMcf/day IP, 16/64" choke; Perfs: NA-NA, length: NA ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: CARROL, E, A-135

Alaska Pipeline One Step Closer to its Grave

On Friday, several members of Alaska's legislature filed a bill to force the state to abandon its plans for a new natural gas pipeline to link the orphaned gas in the North Slope to markets in the Lower 48.  The so-called Alasa Gasline Inducement Act (AGIA) provides seed financing of $500 million from the state to fund the project and was one of former Gov. Sarah Palin's advertised successes.  But what nobody predicted at the time was the rise of shale gas in the Lower 48, which flipped the supply paradigm on its head and cratered commodity prices (nobody predicted the magnitude of the recession either, for that matter).  

We've talked about it in these pages for the past couple of years, but now that foes of the project are taking concrete steps, we might know in the next six months if the project is a "GO" or not.  If the project doesn't work, the logical alternative is an LNG export facility. Given the state's proximity to Asia (you know, you can see Russia from there), it makes a lot of sense.  It too would be an expensive undertaking, but other than Asia, I'm not sure what markets exist for North Slope gas at this time.

Chesapeake to Sell Fayetteville Assets

Chesapeake Energy announced today  that it will sell some of its assets with the goal of paying down debt.  The company plans to sell its Fayetteville Shale assets along with its 25.8% ownership of Frac-Tech Holdings, LLC and its 20% ownership of Chaparral Energy, Inc.  Chesapeake hopes to generate around $5 billion in proceeds (more from Bloomberg).

The company's 487,000 net Fayetteville acres currently produce about 415 MMcf/day.  Chesapeake signed a joint venture with BP to produce the Fayetteville back in September 2008.  In 2009, Chesapeake promoted it as one of its "Big 4" shale plays, but being a more mature dry gas producer with less favorable economics than the company's news ventures, the Fayetteville has become expendable.

Friday, February 4, 2011

Haynesville Shale Rig Count: -4 to 147

The Haynesville Shale rig count resumed its falling trend this week, dropping by four rigs to 147.  Louisiana (106) and Texas (41) dropped two rigs apiece.  The current level is the lowest count since early December 2009 and is 37 rigs below the peak achieved in July 2010.  The spreadsheets and maps have been updated.



U.S. Rig Count: +7 to 1,739

The weekly Baker Hughes rig count showed a seven rig increase nationwide, bringing the working rig count to 1,739. Oil rigs were up nine to 818 while gas rigs were down two to 911.  Miscellaneous rigs held at ten.  By type, horizontal rigs were up eight, vertical rigs up seven and directional rigs down eight.

In the Haynesville Shale region, inclusive of other formations, the rig count dropped by seven to 170.  The count was down three in north Louisiana to 114 and down four in east Texas to 56.

Thursday, February 3, 2011

Dominion Looking at East Coast LNG Export

In its recent investor conference call, Dominion Resources mentioned that the company is considering adding natural gas liquefaction capacity at its existing LNG import hub at Cove Point, Maryland to be able to export LNG.  No decisions have been made and the earliest an export facility could be online is 2015, but the location of the Cove Point facility is promising because of its proximity to the Marcellus Shale.

As with other LNG importers, activity at Cove Point has dropped significantly in recent years, down from 220 Bcf in 2005 to 43 Bcf in 2010.

EIA: Storage -189 Bcf to 2.353 Tcf

With the chilly winter weather last week, gas in storage was down more than usual last week.  The EIA reports that the weekly storage level declined 189 Bcf to 2.353 Tcf.  The weekly withdrawal was 70% greater than last year's withdrawal (-111 Bcf) and 15% higher than the five year average (-165 Bcf).  The current storage level is now 69 Bcf below last year's level and only 5 Bcf above the five year average.


Wednesday, February 2, 2011

Perforation Data Added to LA Completion List

Oddly, there were no new Haynesville Shale completions reported by the Louisiana DNR this week.

But I did update the completions spreadsheets because I finally finished a little project to add data about the perforations - beginning and ending points along with the calculated length of perforation.  In most cases, the beginning perforation is the approximate vertical depth of the well.  Note, I say "approximate" because it is not the true vertical depth.  Also, in some cases the first perforations might begin well away from the vertical shaft.  Additionally, in a few vertical wells that tested multiple horizons you might see a long perforation that starts around 6,500'.  These generally are exceptions to the rule.  I've also updated the maps.

More on Smackover

I like saying "Smackover" - the name has a emphatic certain ring to it that "Haynesville" lacks. Thanks to a reader for sending me a copy of the report on the potential for the Smackover formation issued by an analyst at Jefferies & Co. that I mentioned a few days ago.  The report in question is more of a one page note than an in-depth research report, but it makes some interesting points.

In referencing the Smackover, Jefferies is talking about the Lower Smackover source rock that lies below the Upper Smackover reservoir rock, which has been targeted with mixed results for much of the 20th century.  From the note, Jefferies considers the Lower Smackover to be:
"...an exceptionally thick, organic rich, laminated lime mudstone that is the source rock for regional production... Could be another example of a low permeability/low porosity zone that is commercialized through horizontal drilling and multi-stage fracture stimulation." 

Tuesday, February 1, 2011

Petrohawk's 2010 Operations Update (Including Mid-Bossier Shale)

Petrohawk Energy released its 2010 operational update this morning.  The company is working very hard to retain all of its viable Haynesville leases in this difficult pricing environment.  In 2010, the company participated in 351 new wells, 101 operated and 250 non-operated.  The company is running 16 rigs, but that number should shrink to seven by mid-year 2011.  Petrohawk expects to drill 57 wells in the first half of 2011 and 37 in the second half of the year.  The company has three frac fleets on retainer and had an inventory of ten wells awaiting completion as of year end.

Petrohawk is making progress on its lease retention strategy and expects to complete the program in 2012, even after reducing rig count mid-2011.  By the end of 2011, the company expects to have held 280 operated sections and 590 non-operated sections, leaving 25 operated sections and 120 non-operated sections to complete the program in 2012.

Shale Economic Impact Being Felt

I read an interesting article from Williamsport, PA noting how the fortunes for the regional airport have improved dramatically since the beginning of Marcellus Shale drilling.  Where two years ago the airport had to call in the federal government to keep its last commuter flight from ending service, now flights are expanding and companies with Marcellus-related businesses are renting space from the airport.  It's been a significant turnaround in a short period of time.

I'm sure that same story can be told numerous times over across that region as drilling activity picks up and the economic impact of that drilling is being felt by local governments in perilous economic condition.  Those involved in exploration and production buy gas, rent hotel rooms, eat local food, etc.  Eventually they will hire more and more local workers.  The same story has been told in the Haynesville Shale for several years.  Recently we've seen articles about companies setting more permanent roots with new regional office complexes being built for Chesapeake, Shell and EnCana (although it's in Plano).  The economic impact of shale is real, even if the economics to the producers are marginal at best.

I wonder how the tangible economic impact of increased gas production will affect the hue and cry by those opposed to gas drilling for fear of hydraulic fracturing,

Chesapeake Unpopular in Michigan

Last summer, there was sudden talk of shale gas under Michigan.  EnCana drilled a big well and there was big activity at a state lease auction.  Apparently the action attracted Chesapeake Energy, which has made a habit of rushing into new plays to snap up as much land as possible.  It fuels the company's joint venture strategy - buy low, sell high!  The Chesapeake landmen were dispatched to Michigan to tie up land before anybody else.

But things didn't go so well in Michigan.  Chesapeake CEO Aubrey McClendon is already somewhat of a marked man in the state after proposing to develop a resort on pristine dune acreage he owns on Lake Michigan near Saugatuck Township in western Michigan.  Now, Forbes reports that Chesapeake is being sued by a number of landowners in Michigan after the company used technicalities to opt out of closing lease agreements after re-evaluating the economics of the play.  The landowners claim that most technicalities were easily curable and many ended up in a bad financial straits because of Chesapeake's promises.

It's an interesting article.  There are always two sides of a story, and only one is reported in depth here because Chesapeake offered little defense, but it shows the dark side of speculative leasing for both parties - something many in the Haynesville Shale area can appreciate.  It also goes to show that you shouldn't spend the lease bonus before the check clears the bank.