Wednesday, September 11, 2013

Some Interesting Developments

I've been busy and out of town lately, so I haven't had the chance to update the site as regularly as I'd like - sorry.  I did notice some interesting developments earlier this week that impact the Haynesville Shale.

First, I saw that Freeport LNG signed export agreements (might be restricted access) with Toshiba of Japan and SK of Korea for 2.2 million tonnes per year of natural gas.  Freeport would get a flat fee rather than bear commodity price risk.  Sounds like a sweet deal for Toshiba and SK.  The new deals go along with previous Freeport contracts with Osaka Gas, Chubu Electric and BP and provide enough demand to justify a third liquefaction train at the Freeport facility.  The only problem is that Freeport only has DOE permission (for export to non-free trade agreement countries - the hard one to get) for two trains.  The company does have an application high in the stack, but at some point the DOE is going to call time out on issuing new permits.

I also saw that BG Group, EXCO Resources partner in the Haynesville Shale, declined its option on its 50% share of EXCO's newly acquired Haynesville acreage.  As a result, EXCO had to adjust its earnings forecast up.  Sounds like a high rent problem, but that also means EXCO has to foot the entire acquisition bill, thereby doubling down on the risk of the deal.

Interestingly, I also saw a separate piece saying that BG cut its output targets for next year and will continue to reduce the number of U.S. rigs in which it participates as gas prices are predicted to remain flat.  BHP Billiton (Petrohawk) and Shell are both dropping U.S. rig contracts as well.  The international big boys are going through another round of writing down the value of their shale gas acquisitions.

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