Looks Like the Party Is Over (At Least for the Time Being)

My brother-in-law was in town from Houston over the weekend. He is a geologist who works deep water projects for Shell. He has been able to sit in on some forecast meetings for his projects and also on some meetings for various inland projects that he might start working on (none would involve any HS projects that Shell is currently involved with).

From the meetings that he has attended, it is his opinion that the industry as a whole is in for some rough times and could be so for an extended time period. He said that there have been numerous projects put on the shelf dust that have a high probability of success because the cost/profit ratio is out of whack and will get even more out of whack as the price of the product continues to decline. He does not see the price stabilizing any time soon unless there would happen to be the mother of all winters this years. Unfortunatley, it appears that global warming will make sure that this doesn't happen.

My family has yet to be approached about leasing our acreage. From the discussion that I had with my brother-in-law as to the cost associated with drilling a HS well, I am apprehensive that we will never be approached about leasing our acreage.

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Permalink Reply by Two Dogs, Pirate on December 6, 2008 at 15:01
Mattie, I listen to BS every day about a brother-in-law or someone telling stories to others of the family, most turn out to be what they are BS. SWEPI is one of the most closed mouthed companys working in the shale, take everything you hear with a grain of salt. SWEPI has formed units all around. I think they will drill the units formed.
Permalink Reply by Skip Peel - Mineral Consultant on December 6, 2008 at 15:11
I have pointed out several times that the SWEPI/Encana partnership tends to fly below the radar. Two Dogs is right. They are not prone to seek publicity. They do not have to in order to pump up their stock or impress the Street. They have the cash. I will predict one more time that when all is said and done in the HS Play, SWEPI/Encana will have the largest leasehold of all the players. Speculation as to their "lack of success" to date is misfounded. And they like it like that.
Permalink Reply by Skip Peel - Mineral Consultant on December 6, 2008 at 15:29
KB. I suspect the party you speak of will be SWEPI/Encana acquiring leasehold from existing shale players or being brought in as joint venture partners. It's already happening. Cash is King. The song you speak of will be several duets.
Permalink Reply by Two Dogs, Pirate on December 6, 2008 at 15:33
KB, there are some loud yelling wells down South. Remember the fat lady breaking the glass with her voice, well SWEPI broke the casing with the pressure.
Permalink Reply by Russell on December 7, 2008 at 10:39
How many drilling rigs are left in the Shale after the price decrease and what companies are they that will have a lot to do with how many wells are going to be drilled over the next couple of months.
Permalink Reply by intrepid on December 7, 2008 at 10:47
Have you looked at the Baker-Hughes rig count site? It will tell you where the rigs are.
Permalink Reply by Les Bamburg on December 8, 2008 at 4:48
Russell, the drilling rig count in the Haynesville Shale continues to increase as the play generates better returns than many other regions.
Permalink Reply by CR on December 8, 2008 at 5:26
So in light of all this, how much was the price of NG when the Barnett started up? Was it $12 or $10/mcf? No one was making any money 8 years ago or whenever? How long do you think it takes to re-coup a few million bucks with gas at $7/mcf? CHK screwed up by leased alot more land in the HS than they ever had intended (700,000+acres vs 500,000 acres) which forced them to go into their production funds. Now it's time to make some money so the leasing stops. According to the paper, there's only 15 horizontal wells in the entire Haynesville Shale so it's still in an embrionic state. The average production, according to CHK and Questar, is around 10mmcfpd from their wells. (CHK reporting 5 to 15mmcfpd from their 8 wells and Questar reporting 7.4mmcfpd and 16mmcfpd from two of theirs, all choked)

http://investor.plainsxp.com/phoenix.zhtml?c=132091&p=irol-news...

http://www.questar.com/news/2008_news/08-20%202008%20Haynesville%20...

Looks like the thing to do now is just sit back and go unsigned, collect your 100%, and hope they drill 6 or 7 more wells in your section. J-W has plans to drill 8 HS wells and Encana 12 in northern DeSoto. J-W is about to spud with a brand new rig in 15 15 14 and will go to the next pad and drill two there before going on to the other 4 they have unitized. Encana is all over Jackson B. Davis' land right now. The leasing may have stopped but the drilling is just getting underway. Good Luck.
Permalink Reply by Mattie on December 9, 2008 at 6:08
Again, any info on the Harris or other surrounding wells? Sooner or later, they'll need to file some completion reports.
Permalink Reply by Spring Branch,mineral owner on December 9, 2008 at 18:50
CR, I don't know the date of the Newspaper that stated there were only 15 Horizontal Haynesville wells in the entire play, but there are many, many more horizontal wells than that. CHK alone has more than that in T15N,R15W and the adjoining townships. I have seen the new rig J-W is using in Section 15 of 15/14 and it really is a thing of beauty. @ night it is lit up like a Christmas tree.

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