Friday, February 28, 2014

U.S. Rig Count: -2 to 1,769

Baker Hughes reported a two rig decline in the U.S. rig count, bringing the current total to 1,769.  Oil rigs were up five to 1,430, gas rigs were down seven to 335 (the lowest in decades) and miscellaneous rigs held at four.  By type, horizontal rigs were down one to 1,181, vertical rigs were down one to 391 and directional rigs were unchanged at 197.  Among gas rigs, horizontal rigs were down six to 249, gas rigs were down two to 55 and vertical rigs were up one to 31.

Thursday, February 27, 2014

New Texas Completions

2/6/14 - 2/26/14:
  • Cornelius Evans #11H, XTO Energy: 7.342 MMcf/day IP, 17/64" choke, 5,405 psi; Perfs: 10,845-14,710, length: 3,865 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: HILL, C/KIRBY, JH, A-386 
  • CGU 4 #51HH, Anadarko E&P: 5.246 MMcf/day IP, .0 Bbl/day liquids, ?/64" choke, 2,515 psi; Perfs: 10,809-17,751, length: 6,942 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: MOORMAN, A, A-427 

New Texas Permits

2/7/14 - 2/26/14:

  • Scarlet Knights DU #1H, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: SMITH, GM/BAKER MJ, A-1141 
  • Thomas DU #2HB, EXCO Operating; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: PLATT, T, A-219 

EIA: Gas in Storage -95 Bcf to 1.348 Tcf

The EIA reported today that working gas in storage was down 95 Bcf to 1.348 Tcf last week, taking a break from recent record withdrawals.  The withdrawal was 42% below last year (-165 Bcf) and 24% below the five year average (-125 Bcf).  The current storage level is 40.2% below last year (2.253 Tcf) and 34.5% below the five year average (2.059 Tcf).  Even with the thin withdrawal, the current storage level is 905 Bcf below last year and 711 Bcf below the five year average - still a sizable difference.


Temperatures in the Lower 48 last week averaged 39.3 degrees, which was 3.4 degrees warmer than last year and 1.7 degrees warmer than average.

Wednesday, February 26, 2014

Harvey Gulf Breaks Ground on LNG Boat Fueling Station

This week, Harvey Gulf International Marine broke ground on a $25 million LNG fueling station for boats and trucks in Port Fourchon, LA in southern Lafourche Parish.  The first phase of the facility will have two sites with a 270,000 gallon capacity for LNG.

Harvey Gulf has bought into LNG as the fuel for the future to help it differentiate itself as the "green" provider and to make an investment in cleaner fuels before the market shifts in that direction.  The fueling facility is part of the company's larger strategy in which it has ordered six 300 foot dual fuel (LNG and diesel) vessels, the first of which will arrive this summer.


Outlook: EXCO Resources

EXCO Resources reported its 2013 earnings this morning and gave a peek into its 2014 plans.  Most of this is on the slide below, but the company is currently operating 439 wells in the NLA/ETX region (most of which are Haynesville) and has 1,206 gross drilling opportunities left in its curret inventory.  Around 98% of the company's approximately 70,000 net acres is HBP.


Tuesday, February 25, 2014

New Louisiana Completions

  • Edgar Cason 35-26 HC #1-ALT, Encana Corp.: 21.074 MMcf/day IP on 24/64 in. choke at 7,865 psi; Perfs: 12,691-20,493, length: 7,802 ft.; Red River-Bull Bayou Field, Red River Parish, S35/T14/R11; res. D, serial #246171 
  • Edgar Cason 35-26 HC #2-ALT, Encana Corp.: 21.166 MMcf/day IP on 25/64 in. choke at 8,083 psi; Perfs: 12,647-20,553, length: 7,906 ft.; Red River-Bull Bayou Field, Red River Parish, S35/T14/R11; res. D, serial #246172 
  • Edgar Cason 35-2 HC #1-ALT, Encana Corp.: 22.205 MMcf/day IP on 26/64 in. choke at 8,038 psi; Perfs: 12,830-18,675, length: 5,845 ft.; Red River-Bull Bayou Field, Red River Parish, S35/T14/R11; res. D, serial #246173

Monday, February 24, 2014

Haynesville Shale Rig Count: +1 to 25

The Haynesville Shale rig count was up one last week to 25.  Louisiana was up one (Chesapeake) to 16, while Texas held at nine.


Friday, February 21, 2014

Gas Rigs: +5 to 342

The Baker Hughes U.S. rig count showed a seven rig increase this week to 1,771.  Oil rigs were up two to 1,425, gas rigs were up five to 342 and miscellaneous rigs were unchanged at four.  By type, horizontal rigs were down one to 1,182, vertical rigs were up twelve to 392 and directional rigs were down four to 197.  Among gas rigs, horizontal rigs were up four to 255, directional rigs were up one to 57 and vertical rigs were unchanged at 30.

GMX Resources => Thunderbird Resources

It looks like GMX Resources quietly emerged from bankruptcy a couple of weeks ago as Thunderbird Resources.  The company's assets were sold at auction last summer for $338 million and the recent reorganization reduced the company's debt by $505 million.  It looks like the creditors bought the carcass and split it among themselves, leaving the equity holders with the bones (a.k.a. nada). Royalty owners have been notified of the new company and it looks like business as usual going forward.

GMX, ahem, Thunderbird has about 40 completed Haynesville wells in Texas, all in Harrison Co., but hasn't had an active drilling rig since July 2012.  Don't look for that to change any time soon, although the company hasn't articulated any future plans.

Thursday, February 20, 2014

EIA: Storage -250 Bcf to 1.443 Tcf

Another cold week, another whopper withdrawal.  The EIA reported that working gas in storage was down 250 Bcf to 1.443 Tcf last week.  The withdrawal was 91% greater than last year (-131 Bcf) and 88% above the five year average (-133 Bcf).  Note that the previous week's total was revised slightly upward in this week's report.  The current storage level is 40.3% below last year (2.418 Tcf) and 33.9% below the five year average (2.184 Tcf).  Versus last year, the storage level is 975 Bcf lower!


With each huge withdrawal, the deviation from the five year average gets wider.  Better (for gas fans) that it is below the zero line (red line) rather than above it (light blue line):

Monday, February 17, 2014

Haynesville Shale Rig Count: -1 to 24

The Haynesville Shale rig count was down one last week to 24.  Louisiana was up one to 15 (Anadarko, J-W Operating both go from zero to one; Chesapeake down one), while Texas was down two to nine (Anadarko moved rig to LA, EOG down one).  It's nice to see J-W back (at least for a little while) for the first time since April of 2013.  The company recently permitted four new wells in the Caspiana field in DeSoto Parish.


Friday, February 14, 2014

Coal Having a Good Year/Bad Year

With natural gas prices spiking during this icy winter, one would think coal producers would be dancing a fancy jig. Coal is taking natural gas's role from the past few years of being the low cost replacement.  Coal consumption in power generation should be its highest in three years if the current trend continues, which should help lower gas prices as well.  But at the same time, the industry is taking a beating on the environmental side, specifically from three recent major spills into eastern U.S. waterways.  Interestingly, the three recent spills involve three different coal-related substances (a processing chemical, coal slurry from a treatment plant and coal ash), which highlights the enormous environmental risks associated with mining and burning coal.

The latest bad news came Tuesday Feb. 11 when approximately 100,000 gallons of coal slurry spilled into Fields Creek in Kanawha County, WV and blackened the waterway.  The spill emanated from a Patriot Coal processing facility and was caused by a broken valve.  The backup notification system failed and the pump continued to pump slurry for several hours until it over-topped a secondary containment wall.  Yet another West Virginia waterway ruined by coal.

U.S. Gas Rig Count: -14 to 337

The Baker Hughes U.S. rig count was down seven this week to 1,764.  Oil rigs were up seven to 1,423, gas rigs were down 14 to 337 and miscellaneous rigs held at four.  The current level of gas rigs is the lowest since May 19, 1995 (as measured by BHI from July 1987).  By contrast, the gas rig count peaked at 1,606 on September 12, 2008.

By type, horizontal rigs were up seven to 1,183, vertical rigs were down nine to 380 and directional rigs were down five to 201.  Among gas rigs, horizontal rigs were down five to 251, directional rigs were down eight to 56 and vertical rigs were down one to 30.

Outlook: Encana (Haynesville and TMS)

The Haynesville Shale outlook for Encana can be summarized in one word:  "dark."  On the company's Q4 earnings call yesterday, CEO Doug Settles summed it up:
"we stopped our drilling program there...It’s an asset we like, but we don’t see it as competitive with other investment opportunities in our portfolio, nor consistent with our strategic focus right now which is to better balance our liquids and our gas volumes in the portfolio."
That pretty much sums it up.  Encana has six wells left to be completed from its recent drilling binge, at the peak of which it employed four rigs from late May to early November 2013.  Those days are over and the company is focusing on its "five core growth assets," two of which are in Canada, two in the U.S. Rockies and the Tuscaloosa Marine Shale (TMS).  The order of the day is liquids and the word of the day is "discipline."  This means Encana will stay within cash flow in terms of its capital expenditures and 75% of its capex will be on the Big Five.  That means the company will neglect its Haynesville holdings for at least a year.  Its 2013 drilling binge probably created enough supply to satisfy takeaway and joint venture obligations but not much more.

The open question going forward is will Encana hang onto its Haynesville acreage?  For that matter, will it hang onto its TMS acreage?

Thursday, February 13, 2014

One New Louisiana Completion This Week

  • Hunt Plywood #17-ALT, Petrohawk (KCS): 7.877 MMcf/day IP on 14/64 in. choke at 3,688 psi; Perfs: not reported; Caspiana Field, DeSoto Parish, S1/T14/R13; res. A, serial #245886

Petrohawk Owners: Don't File Your Taxes Yet!

It looks like Petrohawk badly screwed up its 1099s this year.  I've heard reports that the reported income to royalty owners is more than double the actual income in some cases.  From BHP Billton's web site:
"Attention Louisiana and Texas Royalty Owners and Partners:
After the original Form 1099 for 2013 was sent to you, a systems issue was identified which resulted in incorrect amount(s) reported to you on the original form. We will be issuing corrected Form 1099s to all Royality Owners and Partners impacted by this issue. Please disregard the original incorrect Form 1099 provided to you and use the amounts reported on our corrected Form 1099 to prepare and report your 2013 Tax Information. If you have further questions, please contact our Owner Relations Call Center at 1-877-311-1443 or email us. We apologize for any inconvenience."
If you are a Petrohawk owner, you need to wait on a replacement 1099 before filing your taxes.

EIA: Gas in Storage -237 Bcf to 1.686 Tcf

The EIA reported this morning that working gas in storage was down 237 Bcf last week to 1.686 Tcf.  The withdrawal was 56% larger than last year (-152 Bcf) and 46% greater than the five year average (-162 Bcf).  The current storage level is now 33.9% below last year (2.549 Tcf) and 27.2% below the five year average (2.317 Tcf).  Compared to last year, the storage level is 863 Bcf lower.


As shown below, the deviation from the five year average continues to sink:

Tuesday, February 11, 2014

Cameron LNG Receives Export Approval

Today, the Department of Energy approved Sempra Energy's application to allow its Cameron LNG facility to export natural gas to countries without free trade agreements with the U.S.  The Cameron approval is for 1.7 Bcf/day, bringing the approved export quantity to 8.5 Bcf/day.  The project would cost an estimated $10 billion and add three liquefaction trains to the existing facility.

Analysts are divided on how many approvals the DOE will allow.  The government's studies used a 12 Bcf/day threshold figure to conclude that gas exports will not hurt domestic gas users by increasing prices.  There are at least a dozen more open applications still out there, and only a handful are still economically feasible given market dynamics.  There are only so many export contracts that can be negotiated with customers, especially given the large scale LNG export facilities in the Middle East and prospective for Australia.  Additionally, investors will  (should) recognize a limit to export potential, and later facilities likely won't be financed.

I don't know nuthin' from nothin', but I would expect to see three (+/- 1) more approvals before permitting is paused to see the impact of the first operational export facilities.  It doesn't do anyone - LNG developers, investors, gas producers or domestic gas customers - any favors to over permit export capacity.  There are enough white elephants in the world already.

Monday, February 10, 2014

Haynesville Shale Rig Count: -3 to 25

The Haynesville Shale rig count was down three last week to 25.  Louisiana was down two to 14 (XTO shifted a rig to TX and Petrohawk was down one) while Texas was down one to 11 (Anadarko and EOG down one, XTO up one).


Friday, February 7, 2014

U.S. Gas Rig Count: -7 to 351

This week's Baker Hughes U.S. rig count was down 14 to 1,771.  Oil rigs were down six to 1,416, gas rigs were down seven to 351 and miscellaneous rigs were down one to four.  By type, horizontal rigs were up three to 1,176, vertical rigs were down three to 389 and directional rigs were down 14 to 206.  Among gas rigs, horizontal rigs were down four to 256, directional rigs were down three to 64 and vertical rigs were unchanged at 31.

Thursday, February 6, 2014

Outlook: Chesapeake

Chesapeake Energy held a conference call this morning to present its 2014 outlook.  The company continues its existing themes of focusing on liquids and reducing capital expenditures (~$5.4 billion in 2013, down from $6.9 billion in 2012 and $13.4 billion in 2011).  The good news is that the company is not completely ignoring dry gas and the Haynesville Shale.  It will deploy between seven and nine rigs to the Haynesville in 2014 (they are currently running seven) and spend around $540 million, ~10% of the capex budget, in the region.


A Couple New Texas Permits

1/22/14 - 2/5/14:
  • Crenshaw SU #1H, EXCO Operating; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: BURGES, TJ, A-71 
  • BSI/USFS Unit F6 #1H, XTO Energy; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: COLWELL, W, A-8

New Texas Completions

1/9/14 - 2/5/14:
  • CGU 4 #52HH, Anadarko E&P: 6.918 MMcf/day IP, 0 Bbl/day liquids, ?/64" choke, 4,460 psi; Perfs: 10,905-17,588, length: 6,683 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: MOORMAN, A, A-427
  • CGU 15 SA #74HH, Anadarko E&P: 4.926 MMcf/day IP, 89.5 Bbl/day liquids, ?/64" choke, 2,915 psi; Perfs: 10,865-20,320, length: 9,455 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: SNIDER, S, A-184

A Bumper Crop of Louisiana Completions

It's been a long dry spell, but there were 17 new Haynesville completions reported by DNR this week.  Interesting to note the first Haynesville wells drilled by Anadarko in Louisiana (they acquired a handful from J-W Operating last year and are prolific in Texas).  There were some liquids produced with the Anandarko wells, as indicated by the gravity readings, but I didn't see the quantities reported.  Also, please note that while some pressure readings below seem low, this is how they were reported by DNR.

  • Comegys 6-7 H #1, Anadarko: 3.051 MMcf/day IP on 26/64 in. choke at 1,820 psi (gravity 63.4 deg. API); Perfs: 10,535-17,657, length: 7,122 ft.; Caddo Pine Island Field, Caddo Parish, S32/T20/R14; res. A, serial #246867 
  • Comegys 32-29 H #1, Anadarko: 1.164 MMcf/day IP on 18/64 in. choke at 2,351 psi (gravity 57 deg. API); Perfs: 10,072-16,006, length: 5,934 ft.; Caddo Pine Island Field, Caddo Parish, S32/T20/R14; res. A, serial #246868 

Spot Gas Price Closes at $7.91/MMBtu Yesterday

That headline is not a misprint and you did not wake up in 2008, so tuck in your shirt and put on some better fitting jeans.  Yesterday the Henry Hub spot price of natural gas jumped $2.18 to close at $7.91, after having jumped 71 cents the previous day.  The last time prices were this high was Sept. 24, 2008.


Undoubtedly this is a reaction to the cold gripping the nation and is not sustainable (the near month futures are holding around $5.14), but sometimes it's nice to revel in nostalgia for times gone by.

EIA: Storage -262 Bcf to 1.923 Tcf

The EIA reported that working gas in storage was down 262 Bcf to 1.923 Tcf  (Last week's storage numbers were revised down by 8 Bcf).  The withdrawal was 103% greater than last year (-129 Bcf) and 74% above the five year average (-151 Bcf).  The current storage level is now 28.8% below last year (2.701 Tcf) and 22.4% below the five year average (2.479 Tcf).


The size of this week's storage withdrawal would have been a record last year, but it's only the third largest this year, surpassed by 287 Bcf (1/16/14) and 285 Bcf (12/19/13).  As it stands, the strong withdrawal season is painting quite a different picture for natural gas storage going into the last month and a half of winter:

Monday, February 3, 2014

Haynesville Outlook: Petrohawk - "Preserving Value" Rather than Creating Value

Over the next couple of weeks as time permits, I'm going to do a series of "outlook" posts to summarize the current and projected Haynesville activity for the major and minor producers in the play.  I will aggregate smaller, less active guys into a single post, while others will get their own, starting with Petrohawk.  (I know Petrohawk was acquired by BHP Billiton, but I'll continue calling them Petrohawk for now, if only because I don't like holding down the shift button that much.)

Petrohawk ended 2013 with four Haynesville rigs, two in DeSoto and two in Red River.  Since the company has holdings across the Haynesville Play, it tends to drill all over the place, but I suspect 2014 will see the 'Hawk drilling in a more concentrated area, as shown on the graphic below.


Haynesville Shale Rig Count: Unchanged at 28

The Haynesville Shale rig count was unchanged at 28 last week.  Louisiana held at 16, while Texas held at 12.  Just a couple of rig moves.  Very unexciting.