Friday, May 31, 2013

U.S. Rig Count: +9 to 1,771

The Baker Hughes U.S. rig count was up nine to 1,771.  Oil rigs were up eight to 1,410, gas rigs held at 354 for the third consecutive week and miscellaneous rigs were up one.  By type, horizontal rigs were up two to 1,089, vertical rigs were down seven to 450 and directional rigs were up 14 to 232.  Among gas rigs, horizontal rigs were down eight to 250, directional rigs were up five to 58 and vertical rigs were up three to 46.

Thursday, May 30, 2013

Cheniere to Begin Export LNG Trains 3 and 4

Cheniere Energy, operator of the Sabine Pass LNG facility, announced yesterday that it has secured $5.9 billion in debt financing from a syndicate of banks and will begin construction on trains 3 and 4 immediately with an expected completion in late 2015.  The company started work on trains 1 and 2 in August 2012, and that project is about 30% complete.  Trains 5 and 6 are in the planning phase, and the company expects to apply to the Federal Energy Regulatory Commission (FERC) for their approval in September 2013.

Each train has the nominal capacity of  approximately 4.5 mt/year, and the company has entered into contracts to sell 19.5 mt/year (my count), which exceeds the capacity of four trains.  I doubt Cheniere will have much trouble contracting for the rest of the facility's unapproved capacity.  Read this article for a good status report on the project.

EIA: Gas in Storage +88 Bcf to 2.141 Tcf

The EIA reported that gas in storage increased by 88 Bcf to 2.141 Tcf this week, bringing working gas in storage to 2.141 Tcf.  The weekly injection was 16 Bcf higher than last year but 4 Bcf lower than the five year average.   The current storage level is 23.7% below last year (2.805 Tcf) and 3.9% below the five year average (2.229 Tcf).  Given that the current week storage level is 88 Bcf below the five year average, the current level essentially is one week behind average (and still in line with 2011).


Wednesday, May 29, 2013

Haynesville Shale Rig Count: +1 to 22

This week's Haynesville Shale rig count was up one rig to 22.  Louisiana was up one (Encana) to 14, while Texas held at eight.  With Encana's new rig, Red River Parish is now tied with DeSoto Parish for the lead in Haynesville rigs with six.  This is quite a departure from eight months ago when nobody was drilling in Red River.  The return of Encana last fall seemed to spur a minor drilling renaissance there.

Friday, May 24, 2013

U.S. Rig Count: -7 to 1,762

The Baker Hughes U.S. rig count was down seven this week to 1,762.  Oil rigs were down six to 1,402, gas rigs were unchanged at 354 and miscellaneous rigs were down one to six.  By type, horizontal rigs were down nine to 1,087, vertical rigs were down five to 457 and directional rigs were up seven to 218.  Among gas rigs, horizontal rigs were down three to 258, directional rigs were up three to 53 and vertical rigs were unchanged at 43.

Thursday, May 23, 2013

New Texas Permits

5/8/13 - 5/22/13:
  • Crest E Gas Unit (recompletion) #1HB, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: BUCKLEY, J, A-41 
  • Carthage Gas Unit 17 #14, Valence Operating; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: DIAL, C, A-184 

New Texas Completions

5/8/13 - 5/22/13:
Note that Sabine Oil and Gas (first entry) is the former NFR Energy, which was re-branded after Nabors Industries (the "N" in NFR) exited the business, leaving behind First Reserve Corporation (you guessed it, the "FR").  Also note that oil/condensate liquids numbers are included in the three Anadarko completions below.  Additionally, it is worth noting that the Sabine completion (#1) was originally drilled in the fall of 2010.

  • SWEPCO Deep GU #1H, Sabine Oil & Gas: 11.145 MMcf/day IP, 21/64" choke, 5,965 psi; Perfs: 11,773-16,965, length: 5,192 ft.; Carthage Field (Haynesville Shale), Angelina Co., Survey: LITTLE, W, A-397 
  • Hogg, Allie Marie #14H, XTO Energy: 10.102 MMcf/day IP, 17/64" choke, 5,950 psi; Perfs: 11,042-18,594, length: 7,552 ft.; Carthage Field (Haynesville Shale), Angelina Co., Survey: TIMMINS, FG, A-702 

EIA: Storage +89 Bcf to 2.053 Tcf

The weekly EIA natural gas in storage report showed an 89 Bcf net increase, bringing the total working gas in storage to 2.053 Tcf.  The weekly injection was 19% higher than last year (+75 Bcf) and in line with the five year average (+90 Bcf).  The current storage level is 24.9% below last year (2.733 Tcf) and 3.9% below the five year average (-3.9%).  As the red line below indicates, the current year's storage pattern has been running almost exactly in line with 2011.  Hopefully the similarities will end soon because the second half of 2011 set the stage for the disastrous 2012 storage year.

Tuesday, May 21, 2013

New Report Validates LNG Export

A report released yesterday by the Bipartisan Policy Center (link to report; article about it) concluded the following:
"...The scenario analysis revealed that within the suite of natural gas supply and demand assumptions considered, there are ample domestic supplies of natural gas to meet future demand without significant price increases. 
"Similarly, the analysis shows that the United States is uniquely positioned to take advantage of the economic, environmental, and energy security benefits of the country’s large natural gas resource base. Natural gas resources have the potential to create new market opportunities for expanded natural gas use in ways that will grow the economy and improve the environmental performance of the U.S. energy system, if the environmental challenges associated with natural gas development using horizontal drilling and hydraulic fracturing are addressed by industry in collaboration with state and federal regulators."

Monday, May 20, 2013

Haynesville Shale Rig Count: -1 to 21

For the third consecutive week, the Haynesville Shale rig count was down one rig.  It now stands at 21, with Louisiana shedding two rigs to end the week at 13 (Anadarko and Petrohawk) and Texas adding one rig to end at eight (XTO).


(It's funny how things change.  Encana completely vacated the play (in terms of working rigs) for six months in the middle of 2012, and now they are tied for having the most working Haynesville rigs, likely thanks to the Nucor deal.)

Friday, May 17, 2013

BIG NEWS: Freeport LNG Receives DOE Approval for LNG Export

"The Energy Department announced today that it has conditionally authorized Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC (Freeport) to export domestically produced liquefied natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) with the United States from the Freeport LNG Terminal on Quintana Island, Texas."
So reads the press release from the DOE released at noon today.  The facility is conditionally authorized to export at a rate of up to 1.4 Bcf/day for a period of 20 years.  This is big news.  What's next?  Here is "The Path Forward on LNG Export Applications" in the words of the DOE:

U.S. Rig Count: Unchanged at 1,769

The Baker Hughes U.S. rig count was unchanged this week at 1,769.  Oil rigs were down four to 1,408, gas rigs were up four to 354 and miscellaneous rigs were unchanged at seven.  By type, horizontal rigs were down three to 1,096, vertical rigs were down ten to 462 and directional rigs were up 13 to 211.  Among gas rigs, horizontal rigs were up two to 261, directional rigs were down two to 50 and vertical rigs were up four to 43.

New Louisiana Completions

  • Rascoe 1-10-14 H #1, Chesapeake Operating: 13.08 MMcf/day IP on 22/64 in. choke at 6,505 psi; Perfs: 11,534-15,907, length: 4,373 ft.; Benson Field, DeSoto Parish, S12/T10/R14; res. A, serial #244263 
  • Rascoe 12-10-14 H #1, Chesapeake Operating: 13.272 MMcf/day IP on 22/64 in. choke at 6,475 psi; Perfs: 11,657-15,932, length: 4,275 ft.; Benson Field, DeSoto Parish, S12/T10/R14; res. A, serial #244835 

Thursday, May 16, 2013

EIA: Gas in Storage +99 Bct to 1.964 Tcf

The EIA reported this week that working gas in storage was up 99 Bcf to 1.964 Tcf.  The weekly injection was 77% higher than last year (+56 Bcf) and 19% above the five year average (+83 Bcf). The current storage level is 26.1% below last year (2.658 Tcf) and 4.1% below the five year average (2.047 Tcf).



Sunday, May 12, 2013

Haynesville Shale Rig Count: -1 to 22

For the second straight week, the Haynesville Shale rig count was down a rig, this week dropping one rig to 22.  Texas was down two rigs (Chesapeake and XTO Energy) to seven, while Louisiana was up one rig (that same Chesapeake rig) to 15.  Seven Texas rigs is tied for the lowest number (with November 30, 2012) since I began the Haynesville rig count in January 2010.  Right now, only Anadarko (5 rigs) and XTO (2 rigs) are drilling the Texas side of the Haynesville.

Friday, May 10, 2013

U.S. Rig Count: +5 to 1,769

The Baker Hughes U.S. rig count was up five this week to 1,769.  Oil rigs were up nine to 1,412, gas rigs were down four to 350 and miscellaneous rigs were unchanged at seven.  By type, horizontal rigs were up seven to 1,099, vertical rigs were three to 472 and directional rigs were up one to 198.  Among gas rigs, horizontal rigs were up three to 259, directional rigs were down one to 52 and vertical rigs were down six to 39.

This Week's Louisiana Completions

  • FHF 17-14-16 H #1, Chesapeake Operating: 13.416 MMcf/day IP on 22/64 in. choke at 6,021 psi; Perfs: 11,420-15,757, length: 4,337 ft.; Bethany Longstreet Field, Caddo Parish, S17/T14/R16; res. A, serial #244036 
  • Calhoun 34-12-12 H #1, Chesapeake Operating: 14.904 MMcf/day IP on 22/64 in. choke at 7,480 psi; Perfs: 12,456-16,855, length: 4,399 ft.; Red River-Bull Bayou Field, DeSoto Parish, S34/T12/R12; res. A, serial #243062 
  • Nabors 18-11-11 H #1, Chesapeake Operating: 18.168 MMcf/day IP on 22/64 in. choke at 7,760 psi; Perfs: 12,522-16,889, length: 4,367 ft.; Red River-Bull Bayou Field, DeSoto Parish, S19/T11/R11; res. A, serial #244905

Thursday, May 9, 2013

Chesapeake Trimming to Core in Marcellus

Recent news stories have seen deals where Chesapeake Energy has sold batches of properties to competing E&P companies in the Marcellus and Utica Shales, first 162,000 net acres to Southwestern Energy and more recently 99,000 acres to EQT Resources.  Under new leadership since the departure of former CEO Aubrey McClendon, the company is looking to trim its unwieldy lease holdings to be able to focus on core operations.

The natural question for me is what's for sale in the Haynesville Shale?

EIA: Storage +88 Bcf to 1.865 Tcf

The EIA reported this week that working gas in storage increased 88 Bcf to 1.865 Tcf.  The weekly injection was nearly triple last year's injection (+30 Bcf) and 28% greater than the five year average (+69 Bcf).  The current storage level is now 28.3% lower than last year at this time and 5.0% below the five year average.


This week's higher than average injection broke a winning streak for 2013 storage.  For the previous eleven weeks, the weekly injection beat the five year average:

Wednesday, May 8, 2013

Natural Gas Export Gaining Ground, but the Clock is Ticking

I'm a big believer that the world is made of shades of gray, not black and white.  Most of my strongly held convictions are constantly tested by conflicting data points.  It makes it incredibly difficult to hear pundits on TV and radio spouting at the mouth with such indelible confidence.  Nowhere is the shades of gray situation more evident than the debate over the export of U.S. natural gas via LNG.  I am a proponent of export because I am a gas fan and I admittedly have a vested interest.

Beyond that natural stance, I generally believe in free markets, and the free market is calling for LNG export.  The U.S. has an oversupply and other nations have constrained supplies, resulting in higher prices.  Boom!  We export our bounty to those countries - that's how the market works.

But an emotional argument is being made by U.S. manufacturing entities that it is in the best economic interest of the country to stifle this potential market to keep gas plentiful and cheap on our shores.  Ayn Rand is spinning in her grave with that self-serving argument, but as a patriotic dude, I do feel somewhat sympathetic.

A Bunch of Texas Completions (Some With Liquids)

4/11/13 - 5/7/13:
OK, so I got a little behind in reporting Texas completions and permits.  But check out the liquids in  wells #2-5 below...
  • W.L. Liston #8H, XTO Energy: 13.859 MMcf/day IP, 17/64" choke, 5,152 psi; Perfs: 10,933-18,685, length: 7,752 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: TUTTLE, D SR, A-668 
  • CGU 19 #51HH, Anadarko E&P: 5.982 MMcf/day (150 Bbl liquids/day) IP, 18/64" choke, 4,815 psi; Perfs: 10,862-15,699, length: 4,837 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: DUNCAN, S, A-158 

Several Weeks of Texas Permits

4/8/13 - 5/7/13:
  • Wynn Trust H Gas Unit #1HB, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: ROWE, J, A-464 
  • Carthage Gas Unit 17 #15, Valence Operating; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: DIAL, C, A-184 

Tuesday, May 7, 2013

Fourteen New Louisiana Completions Last Week

  • Smith 13 #1-ALT, EXCO Operating: 12.651 MMcf/day IP on 18/64 in. choke at 7,684 psi; Perfs: 13,618-16,839, length: 3,221 ft.; Holly Field, DeSoto Parish, S24/T14/R14; res. A, serial #245493 
  • Smith 13 #2-ALT, EXCO Operating: 12.494 MMcf/day IP on 18/64 in. choke at 7,786 psi; Perfs: 12,488-16,883, length: 4,395 ft.; Holly Field, DeSoto Parish, S24/T14/R14; res. A, serial #245494 

Haynesville Shale Rig Count: -1 to 23

The Haynesville Shale rig count was down one this week to 23.  Louisiana was down one (Petrohawk) to 14, while Texas was unchanged at nine.

Friday, May 3, 2013

U.S. Rig Count: +10 to 1,764

The Baker Hughes rig count was up ten this week to 1,764.  Oil rigs were up 22 to 1,403 (their highest level since October 2012), gas rigs were down 12 to 354 (their lowest level since June 1995) and miscellaneous rigs were unchanged at seven.  By type, horizontal rigs were up eight to 1,092, vertical rigs were up four to 475 and directional rigs were down two to 197.  Among gas rigs, horizontal rigs were down three to 256, directional rigs were down six to 53 and vertical rigs were down three to 45.

PXP Illustrates Haynesville Quandary

Plains Exploration (PXP) held its Q1 2013 conference call yesterday, and on the call, CEO James Flores illustrated the case of why I think activity in the Haynesville Shale has already bottomed out.  Obviously, with gas prices nearly double where they were last year, the Haynesville is not quite the pariah it became, but $4/MMBtu gas is not enough on its own to justify a pickup in activity.

PXP is a bit of an odd bird in the Haynesville because it does not function as an operator.  It entered the play as a JV partner of Chesapeake, which is where it derives most of its Haynesville production.  But, being a producer, it is judged by its production volumes and revenues, so it has to show growth and vitality in this department.  Overall for the company, gas volumes were up about 7.6% in Q1 2013 to 246.9 MMcf/day vs. Q1 2012, but the gains came from other plays.  Production in the company's Haynesville acreage decreased by 22.7% (-39.3 MMcf/day) over the same period to 134.2 MMcf/day.  Interesting to note that with the production declines the Haynesville still represents 54% of PXP's gas output.  As of the end of March, PXP had a working interest in four rigs in the Haynesville.

Thursday, May 2, 2013

Excelon Buying Production in Haynesville?

In business school, we were taught that most business strategies come from a few basic models.  One is vertical integration, where the company diversifies up and down along its supply and production chain (think:  Henry Ford buying rubber plantations in Brazil).  I couldn't help but think of this when I read on Bloomberg that the nation's biggest utility Excelon "has a 'small but growing portfolio' of gas holdings in the Haynesville and Barnett shale regions of Louisiana and Texas."  Apparently the company is considering investing $3 billion in non-core but related energy businesses, including natural gas exploration and distributed solar generation.

This is not really vertical integration, more tangential investment I guess, but being conservative by nature I always get concerned when companies like this stray from their white-hot focus areas.

EIA: Working Gas in Storage +43 Bcf to 1.777 Tcf

The EIA reported that working gas in storage was up 43 Bcf this week to 1.777 Tcf.  The weekly injection was 39% higher than last year (+12 Bcf) but 36% below the five year average (+67 Bcf).  The current storage level is 30.9% below last year (2.575 Tcf) and 6.2% below the five year average (1.895 Tcf).