By OGJ editors
HOUSTON, Feb. 24 -- EXCO Resources Inc. has hiked gross production to 340 MMcfd in its Haynesville shale 50-50 joint venture with BG Group PLC and has begun horizontal drilling in the Marcellus shale.

The Haynesville output, tallied on Feb. 7, came from 34 operated wells drilled with an average of seven operated rigs and compared with 7 MMcfd in the 2008 fourth quarter. EXCO-BG holds 107,800 net acres, up 22,800 net core area acres since forming the joint venture.

Net Haynesville production was 96 MMcfd as of Feb. 7 compared with 47 MMcfd in the fourth quarter of 2009 and 6 MMcfd in the fourth quarter of 2008.

Capital spending for 2010 is budgeted at $255 million net to EXCO to drill 115 operated and 23 nonoperated wells. The operated wells include 95 Haynesville shale horizontals, seven Bossier shale horizontals, six Cotton Valley horizontals, and seven wells in the Vernon, La., area. In the EXCO-BG area of mutual interest, spending will total $741 million net to the joint venture.

TGGT Holdings LLC, a 50-50 joint venture with a BG Group affiliate, had averaged throughput of more than 850 MMcfd. In the 2009 fourth quarter TGGT completed the first of four stages of a 29-mile, 36-in. header system through the Holly field area to gather and deliver the companies’ Haynesville gas to interstate pipelines.

Operations began Nov. 30, 2009, on the system, which will eventually have a capacity of 1.5 bcfd. TGGT averaged 474 MMcfd in 2009, and throughput now exceeds 850 MMcfd.

EXCO-BG increased the operated horizontal rig count to 13 in the Haynesville and plans to raise that to at least 14 for the rest of the year. It also plans to run at least one operated horizontal rig in Appalachia throughout 2010. Current companywide rig counts are 17 operated and four nonoperated.

As EXCO sold assets and reorganized around the shale plays in 1009, it added 242 bcf of gas equivalent (bcfe) of proved reserves through the drill bit and produced 128 bcfe. The majority of the new reserves resulted from 2009 Haynesville horizontal development where the company ran an average of six operated rigs for the year and completed 25 operated wells.

EXCO cut the average gross cost of an operated Haynesville horizontal well 25% to $9.5 million in 2009 and expects 2010 well costs to continue at or below that level. Drilling days were cut nearly in half from 72 days for the early wells.

Under new Securities and Exchange Commission rules, EXCO added an average of 2.5 offsetting proved undeveloped locations with average gross reserves of 6.6 bcf for each producing well drilled. Under the former rules, it would have added an average of 1.6 offsetting proved undeveloped locations.

EXCO-BG is investing in two major water projects. One will enable it to use discharge water from an industrial plant as a key water source for hydraulic fracturing. This will lessen the impact on local water supplies, reduce truck traffic, and provide an environmentally safe option for water procurement.

The joint venture also has a salt water management project to transport service water and gather produced water across its acreage, reducing truck traffic and handling water much more efficiently and more cost effectively.

EXCO-BG’s first horizontal Haynesville well, Oden-30H6 in DeSoto Parish, La., has sold 3.2 bcf in its first year on production. The JV’s average operated well IP in the DeSoto area is 22.8 MMcfd.

EXCO is encouraged by Bossier test results in four vertical Haynesville wells from 2008 and is drilling its first horizontal Bossier well with seven Bossier horizontals planned in East Texas and North Louisiana in 2010.