Replies to This Discussion

Permalink Reply by jMan on January 20, 2010 at 5:09

Fambrad is there any further news on this post.
jman

Permalink Reply by Bill Williams on January 20, 2010 at 7:46

Jffree,

"Silent Bill" here. I just looked at Page 25 of that presentation, thank you for posting it. I read the legend on that map and I'm not sure I get it. They're saying, per the contour legend, that the dark pink area has reserves of 300 BILLION cubic feet of gas PER SECTION? Then it goes lighter pink, and even lighter with 200 Billion and 100 Billion. I think a section is 640 acres, right? So theoretically if someone had exactly a section of acres, say, in the dark pink area of this map, Encana's researchers are estimating that individual would be sitting on 400 billion cubic feet of gas, or roughly $2 billion worth at today's prices? I don't know, just seems unfathomable. Am I reading it wrong?

Permalink Reply by Bill Williams on January 20, 2010 at 7:47

my high school diploma is showing. I meant that person with a section of land, by this map, would be sitting on 300 billion cubic feet, not 400.

Permalink Reply by jffree1 on January 20, 2010 at 8:39

Hey Bill,
That is the way I would interpret that particular map but then I'm not a reservoir engineer, either. That map doesn't indicate how much of that gas would be recoverable though and I suspect it would be substantially less. And a fully devolped section would be needed to maximize the recovery. That might be a good question for the main page... what % of gas in place is recoverable?

Permalink Reply by Bill Williams on January 22, 2010 at 17:45

The more I think about it, the crazier it sounds. 300 Billion cubic feet of gas per 640 acre section. That's half a billion cubic feet per acre, and almost a third of a trillion per section. I've looked around at recoverable reserves for other big gas plays and nothing comes close. Certainly not the Barnett. They've got to be wrong and it's a mistake by whoever made the slide. A careless, bad mistake because so many people probably look at it and flip out like I did. Just as an example of why I think this has to be wrong, Comstock Resources has 72,000 net acres in East TX and LA and they estimate recoverable gas reserves over their entire leasehold at 3.4 trillion cubic feet. Using Encana's math, in the core section, you'd get that much out of 10 sections or so--6,400 acres. Don't know why I'm dwelling on this. I sure wish it was true, I'd load up the truck and head to Beverlee. Thanks Jffree for contributing to the discussion regularly. I enjoy reading your posts and am always pumped up by the Cheerleader, too!

Permalink Reply by jffree1 on January 22, 2010 at 18:05

It does sound pretty crazy, Bill. You have to remember that they put out those presentations to pump up investors and sell stock. That map looks suspiciously like the (not pink) map I found a while back that was also an Isopach but the little numbers along the lines indicated thickness of the shale and not BCF/section. I wonder if they used a map that had another purpose and just didn't chage the numbers?

Permalink Reply by Cheerleader on January 22, 2010 at 19:05

or..maybe the map is correct. Never lose sight of , or underestimate the Motherload!!

Permalink Reply by ronda and bruce on January 23, 2010 at 4:19

i LOVE your optimisic posts! they keep us thinking positive! Thanks, Cheerleader!

Permalink Reply by ALongview on January 22, 2010 at 19:40

Most of the maps/presentations have somewhere in the neighborhood of 200-250BCF/section but they have also an estimated recovery of only 15% or so of total gas. This leaves roughly 30-37.5 BCF/section ultimately recovered or 5-6 wells doing 6-6.5BCF each.

Permalink Reply by GHart on January 22, 2010 at 20:06

A 6 BCF well at 75% to the operator/owners (25% to the lessor) at $5 gas would yield $22,500,000 to the operator, gross,before any expenses or well costs. If it costs 8-10 million to drill one, they wouldn't do it. There is too much risk to wager 8mm to only get 23mm max out of it. These are broad brush numbers, but the payoff has to be substantially higher than that for all these rigs to be moving in. Granted, they may be counting on higher gas prices in the future, but I wouldn't bet on this level of activity by this many companies for that kind of return.

Permalink Reply by ALongview on January 23, 2010 at 4:33

I have seen estimates of a 56% rate of return on $7 gas so I do believe that the risk is worth it at those numbers. The difference is that the Haynesville has larger expenses upfront but also larger volumes of gas being sold up front than the other shale plays. Also, stacked pay zones give them future production on the same leases......it's better to produce from a lease you hold than to go out and pay another bonus and 20% royalty. The Haynesville should become more profitable as it matures.

Permalink Reply by James L. Williams on January 23, 2010 at 16:15

In a presentation last year Cabot Oil and Gas had a chart that put the Haynesville GIP at 175 bcf/section for an average thickness of 200 ft, and estimated a recovery factor of 25%. The gas charged porosity is supposed to be about 9%, again according to Cabot. I did a back-of-the envelope analysis assuming a pressure of 10,000 psi and a compressibility factor of 1.2 (a rough estimate) and it compared well with 175 bcf/section of free gas. (I don't know how much gas is adsorbed in the Haynesville Shale, but it appears to be much less than the 30% or so I have seen estimated for the Barnett Shale.) The Bossier is usually regarded as having somewhat less GIP than the Haynesville, but the total for the two formations could easily be 300 bcf/section. Another way to look at this is to consider the well spacing and the predicted EUR for the wells. In Louisiana it appears that Petrohawk is talking about drilling up to 8 Haynesville wells per section. The average EUR is 6.5 bcf, so the total gas recovered would be 52 bcf/section for 8 wells per section. If RF is 25% that indicates that there is 208 bcf/section.

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