Replies to This Discussion

Permalink Reply by BirdDawg, plain ole' idiot on March 24, 2009 at 12:35

Jay,
Your right. And using old or misleading data to support their claims. Reckon he has an agenda? We can always get ole CB to "educate us all". HA HA
Sorry, I'm rolling around on the ground laughing.
Those two are a couple of self serving jokes, or jerks... (just my opinion)

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Permalink Reply by Big Daddy, bcnr on March 24, 2009 at 13:25

Great site Jim. Thanks There are indeed a lot of horizontals being drilled in Desosto Parish.

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Permalink Reply by CB on March 25, 2009 at 8:57

No scare tactic, just telling my point of view as a well informed unbiased geologist. I understand your concern as a royalty owner when you hear negative things about the HS. Hell I'm the same way when I heard 6 months ago analysts say that NG was going to crater, and my monthly revenues were going to crater. I have no axe to grind, I am just pointing out some negative factors which you might or might not want to consider. No reason to get defensive when I express an educated opinion. When you do some financial planning, please consider that the HS has a very steep average decline rate, and revenues will decline rapidly. I wish my production did not decline, but it does. The euphoria needs to be tempered, and put in perspective. A lot of the posts are by non technical people who rightfully so are full of enthusiasm and optimism. Weed through the BS hype put out by some of the exploration companys that are driving their stock price. I don't care one way or the other whether the HS is a boom or bust. Just airing my opinion.

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Permalink Reply by w.r. frank on March 25, 2009 at 9:58

Jay, I just posted a link on Parker's NG discussion to Credit Suisse's report dated March 13, 2009. It is full of good data. It has a chart of breakeven NG prices(including a 10% IRR) by basin. HA. Shale is the lowest at $3.26/mmbtu.

With the biggest player, CHK, having a $1.65B drilling carry, and $3.26 breakeven, there won't be many rigs laid down, except small independents who can't play with the big boys on $10MM AFE wells.

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Permalink Reply by Grillin' - MmmMmm on March 27, 2009 at 10:34

The only concern I have is that gas is selling for $4 right now, with a $0.25 or so differential to HH, yielding a $3.75 price. With breakeven at $3.26, doesn't leave an awful lot of profit!

But holding leasehold is a very powerful force. The last thing anyone wants to do is to have to drop acreage or pay extensions, particularly those high dollar extensions. And some of these companies know if the let the lease expire, their reputations will prevent them from getting some of these leases back.

So, being torn between wells that probably won't make much money in the near term versus losing some really expensive acreage, I think most of these companies will be drilling to hold the acreage and betting on the higher prices later. Also remember that most of these companies have hedged their gas for 2009 and parts of 2010 at $8-9 henry hub. So they are doing okay for a few months.

All of that said, the pricing issues are probably why you don't see a lot of the major O&G's jumping in. Shell is in and BP has some HBP acreage, but buying in to the play like BP did in Fayetteville is not going to fly for the majors. Too expensive in today's market for low returns. Maybe later when the market is a bit firmer.

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Permalink Reply by w.r. frank on March 27, 2009 at 11:02

Plus, the biggest driller-CHK-has a $1.65B drilling carry and lots of acres to get to HBP. According to Les B., there were 55 rigs running on March 6 and I think CHK had 22 of them. CHK says it will end the year at 30 rigs and average 26.

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Permalink Reply by Grillin' - MmmMmm on March 27, 2009 at 12:25

Yep, they'll keep drilling with PXP's money! Sweet deal! And they are one of the biggest hedgers, with 2009 gas hedged out at $9. However, if gas stays below $4 for any length of time, expect to see their plans change just a bit and I think they'll end up with a bit fewer wells. But if prices start moving up, the number could creep up too.

Of course, never try to estimate what Aubrey is going to do next. He always does something, but you just never know what!

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Permalink Reply by DaddyT on March 25, 2009 at 9:44

I Care, I want it to be a Big Boom, for everyone in the area. This is what we need. Everyone should always hope for the best for everyone else and themselves. I always have Hope for all of us and our Country!

Signed, DaddyT's Wife

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Permalink Reply by Spring Branch,mineral owner on March 25, 2009 at 15:29

Cb, have you been on the ground in the Haynesville Shale play?

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Permalink Reply by CB on March 27, 2009 at 7:40

No way in the world is $3.26/MMBTU breakeven for the HS, I don't care what Credit Suisse says. I was at an oil meeting in Lafayette last summer and Petrohawk's own president said they need $8.50 to get a 10% rate of return. I don't know where these ridiculously low #s are coming from. Probably some pimply faced 25 year old so called expert analyst.

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Permalink Reply by w.r. frank on March 27, 2009 at 8:22

Back in the early fall, Deutsche Bank estimated breakeven at $4.73/mmbtu, with a 10% IRR, and with IP rates of 10 mmcfd and EUR of 7 bcf. Things are more known today and HK itself says 7.5 bcf/well EUR and we all see the very good IP rates from HK, XCO, STR and CHK. The Deutsche Bank analysis was based on leasehold cost of $25,000/acre. Has anybody gotten a bid that high lately? HK's cost is $5,000/acre. CHK's is negative because of the PXP JV.

It is widely quoted that breakeven for the industry across all plays (conventional and unconventional) is in excess of $8/mmbtu.

I am neither 25 nor pimply faced. My analysis indicates less than $3.50 (there are too many variables to get closer than that). If you wish to publish your analysis leading to a higher number, I would like to read it. I suspect Floyd Wilson was speaking of the industry wide breakeven, not the HA. Shale.

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Permalink Reply by Jon Williamson on March 27, 2009 at 10:50

Personally I think companies are crazy to produce these wells with gas at $3.70. I want them to just leave my gas in the ground. It is worth double that. Sadly I believe we are a year away from having these wells become economically viable.

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