Why does Chesapeake 2nd Qtr Earnings Stmt Call HS "The BLOB" ?
Really Cool Info in the Chesapeak 2nd Qtr Earnings Info
"With about 3 million acres in the Blob, there’s roughly 4,700 square miles in the Haynesville."
"The Haynesville is over pressure and as a result, the Haynesville wells have a real advantage as the compression cost can be avoided for years as the reservoir pressure will exceed line pressure.
Another very positive attribute of the Haynesville will be its superior gas price compared to the Barnett, Woodford, and Fayetteville. In July the Haynesville well head gas price exceeded Barnett well head gas price by about $1.50 per MCFE. This month with gas prices about $4.00 lower, it will still be about $1.35 higher than in the Barnett.
On average every square mile of Core and Tier 1 Haynesville Shale contains an average of 180 BCF gas in place.
This is based on an average formation thickness of 220 feet across this 3 million acres, original formation pressure of almost 10,000 pounds per square inch, and porosity, permeability, and water saturation measurements. From that gas in place Chesapeake will recover about a 52 BCF per square mile through the drilling of eight wells per square mile. This would result in per well average recoveries of about 29% of the gas in place, which is consistent with expected Barnett recoveries although Barnett drilling is 50% more dense than planned Haynesville drilling. This is a smaller recovery factor than expected from the Woodford and Fayetteville.
With about 3 million acres in the Blob, there’s roughly 4,700 square miles in the Haynesville.
At 52 BCF of recoverable gas per square mile, that equals about 2.45 BCF of recoverable gas in the Haynesville, exactly consistent with what Chesapeake had predicted from the beginning. So rather than this number being hype, it is instead an entirely reasonable number based on thorough scientific examination reinforced by actual drilling results to date. These are reasonable early estimates of the total resource that Chesapeake and others plan to produce over time.
Natural constraints to the play’s growth:
The play will require decades to fully develop and since much of the play includes leases that have been held by production for as many as 50 years, many companies will take a very methodical approach to developing their Haynesville assets.
For the next two to three years there’s probably not more than 1.5 BCF per day of incremental pipeline capacity out of the Haynesville, much of which Chesapeake has tied up. In the meantime, major new transmission pipelines will be planned and will be built to serve rapidly growing southeastern markets but Chesapeake does not believe people should model for the Haynesville to be producing more than 1.5 BCF per day by more than three years from today. "
Info continues at:
http://www.123jump.com/earnings-calls/Chesapeake-Energy-Earnings-Ca...
"With about 3 million acres in the Blob, there’s roughly 4,700 square miles in the Haynesville."
"The Haynesville is over pressure and as a result, the Haynesville wells have a real advantage as the compression cost can be avoided for years as the reservoir pressure will exceed line pressure.
Another very positive attribute of the Haynesville will be its superior gas price compared to the Barnett, Woodford, and Fayetteville. In July the Haynesville well head gas price exceeded Barnett well head gas price by about $1.50 per MCFE. This month with gas prices about $4.00 lower, it will still be about $1.35 higher than in the Barnett.
On average every square mile of Core and Tier 1 Haynesville Shale contains an average of 180 BCF gas in place.
This is based on an average formation thickness of 220 feet across this 3 million acres, original formation pressure of almost 10,000 pounds per square inch, and porosity, permeability, and water saturation measurements. From that gas in place Chesapeake will recover about a 52 BCF per square mile through the drilling of eight wells per square mile. This would result in per well average recoveries of about 29% of the gas in place, which is consistent with expected Barnett recoveries although Barnett drilling is 50% more dense than planned Haynesville drilling. This is a smaller recovery factor than expected from the Woodford and Fayetteville.
With about 3 million acres in the Blob, there’s roughly 4,700 square miles in the Haynesville.
At 52 BCF of recoverable gas per square mile, that equals about 2.45 BCF of recoverable gas in the Haynesville, exactly consistent with what Chesapeake had predicted from the beginning. So rather than this number being hype, it is instead an entirely reasonable number based on thorough scientific examination reinforced by actual drilling results to date. These are reasonable early estimates of the total resource that Chesapeake and others plan to produce over time.
Natural constraints to the play’s growth:
The play will require decades to fully develop and since much of the play includes leases that have been held by production for as many as 50 years, many companies will take a very methodical approach to developing their Haynesville assets.
For the next two to three years there’s probably not more than 1.5 BCF per day of incremental pipeline capacity out of the Haynesville, much of which Chesapeake has tied up. In the meantime, major new transmission pipelines will be planned and will be built to serve rapidly growing southeastern markets but Chesapeake does not believe people should model for the Haynesville to be producing more than 1.5 BCF per day by more than three years from today. "
Info continues at:
http://www.123jump.com/earnings-calls/Chesapeake-Energy-Earnings-Ca...
Views: 54
Replies to This Discussion
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Permalink Reply by insomniacnla on -
CHK CEO said that they have the core area mapped out and it is an irregular shape so they call it "the blob". He also said that they are not giving out information as to where the boundries for the core area are located.
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Permalink Reply by Barkley on
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"Chesapeake does not believe people should model for the Haynesville to be producing more than 1.5 BCF per day by more than three years from today. "
Does this mean they intend to just drill and cap them off?
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Permalink Reply by Cillian on
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I think it might refer to rig availability/infrastructure constraints. Here's McClendon's response to the a question about a glut (from my transcription of the 2nd QTR conference call, so please excuse any typos):
"Now before you become concerned about longer term natural gas prices, as a result of the sheer size of the Haynesville, please remember some likely natural constraints to the play's growth: first, it's sheer size. The play will require decades to fully develop, and since much of the play includes leases that have been held by production for as many as 50 years, many companies will take a very methodical approach to developing their Haynesville asset. secondly the shale is found at about 11,500 feet deep on average and takes rigs that must have at least 1k hp engine, 600k lb rated mast, 1600 hp triplex pump -- and top drive. There are not many spare rigs with these capabilities, so the availability of rigs will be the second serious impediment to the play's production ramp-up. Third, we believe that for the next 2-3 years, there's probably NOT more than 1.5 bcf/day of incremental pipeline capacity out of the Haynesville, much of which we have tied up."
In the meantime, major new transmission pipelines WILL be planned and WILL be built to serve rapidly growing southeastern markets. but we do not believe you should model for the haynesville to be producing more than 1.5bcf/day by more than 3yrs from today. this pipeline constraint, along with slowing growth from the Barnett over the next few years and very little incremental growth possible for the next 2-3 years in the Rockies and ongoing declines in the Gulf of Mexico and in Canada, plus increasing demands from the US power sector should be sufficient in our view to prevent a US gas glut from developing and we believe gas prices will generally settle in an average range of $9-$11/mmbtu at Henry Hub pricing. "
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