Wednesday, March 13, 2013

Happy Birthday Haynesville Shale! Five Years Old

Next Sunday marks the fifth birthday of of the Haynesville Shale.  While there are Haynesville wells going back to 2006, I always view March 24, 2008 as the official birthday of the Haynesville Play.  That's the day that Chesapeake Energy dropped a bomb of a press release that announced its "discovery" of the play and started the Great Haynesville Land Rush.  One can argue that Chesapeake didn't discover the field, especially since Encana completed its first Haynesville well a year before Chesapeake, but they certainly ushered in the boom with a bang.

I started this web site in May 2008 as something of a lark, but I quickly became obsessed with following the rapid development of the Haynesville.  Over the past five years we have seen earth-shattering changes because of shale gas, and one can trace most of that back to Chesapeake's announcement.  I won't replay all of the excitement, but we quickly went from natural gas scarcity to a glut, which killed natural gas prices and pushed most producers to the brink of extinction.  But our gas glut and the cheap commodity prices that followed caused a ripple effect in world market that is becoming a tsunami in global geopolitics.  Domestic manufacturing is making a comeback - had anyone even coined the word "reshoring" five years ago?  We are at the early stages of major national and international changes, all because of U.S. shale gas, and it's fascinating to watch.

But ironically some of the biggest drama played out at Chesapeake Energy.

The announcement of the Haynesville Shale led the company on a property acquisition warpath that continued in other shale plays across the country.  The company bought low, borrowed big, sold high and played again.  But the buying binge was predicated on higher natural gas costs.  A global economic recession didn't help much either.  The company has been called a Ponzi scheme, but I don't think that is accurate.  If gas prices had gone back to a comfortable range (maybe $6-7/MMBtu?) and the recession hadn't been so bad, Chesapeake CEO Aubrey McClendon would have been considered a genius and the company could have continued to be a juggernaut.

But that didn't happen.

And now on April 1, a week after the fifth birthday of the Haynesville Shale, McClendon will leave the company he founded, forced out by investors who could no longer take his cowboy style and self-dealing ways.

There is no big moral of the story or any ribbon to tie a neat bow around it.  The circumstances around the Haynesville Shale for the past five years are a lesson in disruption.  Shale disrupts the gas market...Economic woes impact gas market...Low gas prices upend domestic coal consumption..Shale gas technology applied elsewhere unlocks vast domestic oil resources...Abundance of domestic gas leads to the U.S. possibly going from net gas importer to net gas exporter...All that LNG once destined for the U.S. needs to find a home and tightly controlled European and Asian gas import markets are beginning to unravel...The U.S. manufacturing woes begin to be reversed...

It goes on and on.  We can only stay tuned to find out the next disruption.  Happy birthday, Haynesville Shale.

1 comment:

Anonymous said...

Thanks for this blog, it is always a good read