Vickie Wellborn, Nov. 7, 2010 - shreveporttimes.com

Combined with low natural gas prices is the increase in operational
costs that has oil and gas operators watching the bottom line.

Service costs operators have driven up costs in the Haynesville Shale by continuing to drill in a low gas price environment. And pressure pumping services have increased more than three times their prices just over a year ago, said Joan Dunlap, Petrohawk's vice president of investor and
community relations.

"Companies drilling have sent the signal that they will continue to drill and complete, for the moment, even though the cost to do that is higher than it should be. We've compromised our ability to negotiate these prices down," she added.

Petrohawk's average cost per well was $10 million in 2009, and this year, it is looking like $10.5 million, although the program is gaining efficiencies and should be about $1 million less per well this year. "Service companies have eaten up those performance improvements," Dunlap said. "For the Haynesville to be successful long-term, everyone has to get off the treadmill and recalibrate costs."

Many are combating costs by changes in the overall drilling plan. EnCana, for example, has found success in cutting production costs with its Haynesville Shale operations through what it calls a gas factory approach, which essentially are multiple wells drilled from a single pad and served by one pipeline. EnCana has drilled 73 wells to date, compared to 49 last year.

Like EnCana, Exco is improving its efficiency by drilling more wells from one pad site. In the DeSoto Parish area, Exco recently drilled four wells on 80-acre spacing from one drill site and then simultaneously fracture stimulated all four wells. In the same section, two vertical wells were drilled and equipped specifically for monitoring downhole microseismic activity during the fracturing operations and both were equipped for long-term reservoir pressure monitoring.

Petrohawk also has developed a new well design to mitigate costs. The third quarter also saw a significant decrease in spud-to-spud days, down from 52 days in second quarter to 47 days in third quarter. As further example of this trend, there were six wells drilled in less than 40 days, with one of those wells drilled in 30 days spud-to-spud. A direct result of the increased drilling efficiency is the number of wells drilled. The company drilled 29 operated wells during the quarter, its highest number of wells ever drilled in one quarter. Petrohawk expects to have between 15-20 wells utilizing the new well design drilled, and a portion of those completed by the end of 2010.