Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 31, 2024 at 5:00

I know it is frustrating to not get notices.  I've sent Keith an email.  I know he has been working on this.

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Permalink Reply by Steve H on Sunday

So. No one is really talking about the confirmation that they averaged 30 million D&C cost per well. 13 wells. 390,000,000 million total. Price of natural gas has been an absolute dumpster fire the last couple years.  

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Permalink Reply by Hale Yayuh on Sunday

I haven't kept up with it, how deep, what is the approx TVD of those wells? 17k feet? I know it's deep, and hot, but $30 mil each? They better pan out to be monsters. Anyone seen a projected EUR of late? A fascinating play / extension, hope it works for them, that's risky.

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Permalink Reply by Skip Peel - Mineral Consultant on Sunday

I think CRK has said the cost for Western Haynesville Shale (Deep Bossier) D&C is something north of $30M per well.  At anything north of $30M, I wouldn't publicize the real cost either.  This is a risky bet on much better natural gas prices.  Remember that CRK went all in on this play a couple of years ago when prices were much better.  See my monthly settlement price discussion.  The more M&A that happens in dry gas plays, the more it is likely that this bet does not pay off.

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Permalink Reply by Hale Yayuh on Sunday

How do you think M&A activity could influence this? Nothing is coming to mind other than a super major or some other company could possibly buy CRK and the play gets abandoned?

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Permalink Reply by Skip Peel - Mineral Consultant on Sunday

What M&A does in the O&G industry is concentrate reserves into the hands of fewer and larger companies.  Those companies have greater control over costs, are seen as better bets for stockholders and the financial markets and are better positioned to control the level of supply.  This all serves to mitigate the wild price swings we have seen in all major basins but particularly here in the Haynesville/Bossier play.  The benefit is that better balancing of supply will help to keep natural gas prices from getting too low.  Too many times the price has been below break even for even the most efficient of operators.  That ability to have pricing power and to maintain internal rates of return is what investors, the stock market, banks and private equity have been screaming for ever since the era of unconventional production kicked off. It also serves to keep prices from getting too high.

Recall that in the early years of those unconventional plays, it was not the super majors that were embracing horizontal drilling and fracking it was the independent operators and sub-majors that primarily drove the shift.  And those early adopters went deeply into debt chasing acreage and paying astronomical prices.  Thank you, Aubrey McClendon and Floyd Wilson.  Those deeply in debt companies could not reduce production when prices crashed.  They had to service debt, meet contractual obligations like MVCs and fund their field operations.  They kept supply high when it needed to drop to stabilize prices. The only major operator in the early Haynesville play was Shell (SWEPI) and they didn't stick around for long and bailed along with their partner Encana to go chase oily plays.  Now think about the last few years and how the Haynesville operators have changed.  Southwestern bought Indigo and GEP Haynesville, Chesapeake acquired Vine and Comstock acquired Covey Park.  There was some consolidation prior to that but that lineup is basically where we are now.  With the SWN-Chesapeake merger we have Expand Energy, Aethon, Comstock and to a much smaller extent BPX.  All others are minor players and those backed by private equity will be looking to sell to the major operators when they can make a profit.

With Jerry's money, I don't think Comstock is an acquisition target.  There are other small operators out there that could be acquired - Blue Dome, Pine Wave, Paloma and Silver Hill.  Ensight IV sells off their better HA units somewhat regularly as seems to be their business model. Aethon has attempted to market their HA assets but not found the right buyer or the right price.  And BPX doesn't prioritize the HA/BO and would likely shed those assets for the right price to continue their pursuit of oil.  The super majors are still oil focused and are not looking to acquire dry gas assets.

Please excuse the lengthy response.  These are things I think about in my daily business in order to advise my clients who are all dry gas owners.  In addition to HA consolidation, the greater volumes of gas coming out of the Permian will serve to cap the price of natural gas from now on.  What every dry gas producer is looking for is greater demand and placing their bets on LNG.  We will all know whether that bet is a winner in another five years.  It is far from a sure thing.

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Permalink Reply by Steve H on Sunday

If Jerry Jones treats Comstock / Western Haynesville play anything like his football team. Seems like he’s gonna spend a lot of money with very little return. 

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Permalink Reply by Skip Peel - Mineral Consultant on Monday

Ouch, Steve.

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Permalink Reply by Rock Man on Monday

As an Eagles Fan. I love seeing what JJ is doing with the Cowboys! LOL

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Permalink Reply by Jimmy Hamiter yesterday

You're having more fun than me. As a native of Shreveport now living in DFW, my teams are #1 Saints, #2 Cowboys. 

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Permalink Reply by Hale Yayuh on Monday

Yep. Except that his financial return from his team appears to have been a gargantuan financial success. He paid $140 million for it in 1989 and it's worth $11 billion today. Sheesh, no wonder he's cocky. No wonder he's messing around drilling some wells.$30mm/well... no big deal. I am continually amazed at how fast crazy wealth is created in this latter half of my life. And that entertainment pays big.

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Permalink Reply by Ryan Howrish on Monday

After a period of consolidation, I think you will see the larger companies look to get rid of their "non-Core" assets and the cycle will start again.

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