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).