EnCana - Haynesville Shale Update (10/20/11)

Information from EnCana's 3rd Qtr analyst call.

 

"In the Haynesville Shale, the Haynesville Shale performed exceptionally well during the quarter. Production averaged 524 million cubic feet equivalent per day, up about 70% from the third quarter of 2010. We've drilled 20 net wells in the third quarter for a total of 65 net wells in the first 3 quarters of the year, and we plan to drill a total of about 85 net wells by year end. We currently have 11 operated rigs running in the area, as well as an additional 9 rigs operated by our partners.

Drilling and completion efficiencies continue to improve with our resource play hub development model, and infill wells are producing as expected.

In the Credence area of the DeSoto Parish, drilling days averaged 32 days versus the 2010 average of 42 days. This is a 24% year-over-year improvement. Our experience in developing resource plays has taught us that longer horizontal lateral lengths brings increased initial production rates, higher expected ultimate recoveries and improved supply costs. To that end, we drilled 2 record length Haynesville horizontal wells in the Sabine area of East Texas during the quarter. Both wells were drilled with a horizontal length of about 7,500 feet and completion of the wells begins this quarter with up to 30 to 35 completion stages per lateral. We expect to achieve expected ultimate recoveries from these wells between 11 and 13 Bcf per well.

And just a few weeks ago, we successfully drilled 2 record length horizontal wells in North Louisiana. The first lateral section was drilled to a length of 6,879 feet and one week later, we raised the bar by drilling a lateral section reaching 8,003 feet. If you'll recall, we obtained regulatory approval in Louisiana to drill extended length wells across a 3-section unit where previously lateral length was limited by the lease boundary to approximately 4,500 feet. We are currently drilling 2 additional long lateral wells, and we'll then have a total of 4 unit wells in Louisiana of approximately 7,000 feet in length, which are expected to be completed before the end of the year.

We have several more applications under review in Louisiana, and we expect to receive the results of those applications in the upcoming months. Our Mid-Continent team continues to deliver when it comes to optimizing completion design and driving down cycle times. A year ago, we thought that pumping up to 80 completion stages per month was pushing the limits of our technical abilities. In the month of September, one of our completion crews pumped a total of 145 stages. The combined efforts of our field staff and our service providers have significantly accelerated the pace, as we are both advancing the design and execution of completions in the play.

Our Haynesville dedicated fit-for-purpose completion crews have only been up and running for -- the most recent crew has only been up and running for 3 months, and already they have completed a total of 90 stimulation intervals in September, reaching this milestone much faster than we had expected. Our goal is to have this new crew execute an average of 140 stages per month by the end of the year, at about 1/3 of the time it took our previous crew to do that same feat. And our teams are well on their way to achieving this objective."

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Permalink Reply by R B on October 20, 2011 at 17:52

Thanks as always Les.  Reads like this is a good report, but could you translate?  Any indication that Encana may be looking at leasing again in the near term in the areas outside their acerage already held?

many thanks again,

 

R B

Permalink Reply by Les Bamburg on October 21, 2011 at 3:08

RB, EnCana's main points related their ability to drive down costs both in drilling and completion of the wells.  This is primarily due to reduced drilling days per well and the shorter time to complete each frac stage. 

 

EnCana is also experimenting with longer laterals (up to ~ 1.5 miles) in both Texas and Louisiana as a way to reduce development costs per unit of gas produced.

 

Unfortunately there was not any information provided that would indicate EnCana intends to re-start leasing activity.   

Permalink Reply by Spring Branch,mineral owner on October 21, 2011 at 3:31
Les, do you happen to know the names of the two long lateral length wells in the "Sabine area of Texas"?
Permalink Reply by Les Bamburg on October 21, 2011 at 4:11

SB, I believe these are the two wells.  Jffree can probably verify.

 

EnCana, BSI Unit A47 #1H   Well, Serial #710044 , San Augustine  County

EnCana, BSM Unit A20 #1H   Well, Serial #716824 , San Augustine  County

Permalink Reply by jffree1 on October 21, 2011 at 4:41
Les, I agree with BSM Unit A20 #1H but I believe the other one is BSI Unit A47 #2H which has a proposed lateral of 7450' (from penetration point).
I tried (twice) to upload the plats but the site wouldn't let me...

Permalink Reply by Les Bamburg on October 21, 2011 at 5:07

Jffree, thanks for catching my glitch.  See revised wells below:

 

EnCana, BSI Unit A47 #2H   Well, Serial #715056 , San Augustine  County

EnCana, BSM Unit A20 #1H   Well, Serial #716824 , San Augustine  County

Permalink Reply by jffree1 on October 21, 2011 at 6:21
Here are the plats.  I had to convert them to jpgs.
Attachments:
Permalink Reply by Tom Hough on October 27, 2011 at 5:15

Les have the geologist determined the potential of the well on the Moritz place drilled by the Ensign 765 rig yet?

I didn't realize you could drill those kind of distances laterally. Why aren't the comapanies setting locations on the section corners and drilling four long diagnally run wells across the four sections from one location? We have a Petrahawk location on our place that actually butts up to an Encana location and both are just a short distance from a section corner where Encana could have produced two of their sections from one location.

Permalink Reply by Les Bamburg on October 27, 2011 at 5:35

Tom, because the well just finished drilling it is too early to know the production potential.  I will let you know if I see any flow test information.

 

The optimum orientation for Haynesville Shale laterals is generally in a north-south direction.  Also, proper spacing for 6-8 long laterals in a section require either north-south or east-west orientation.

Permalink Reply by Renee Rains on October 27, 2011 at 5:54
I have a question... if your lease has ran out and they drill in the section beside you and come over on your property lateral do they have to pay you for crossing onto your property even if it is under ground?
Permalink Reply by Les Bamburg on October 27, 2011 at 6:13
Renee, I will assume you are in Louisiana.  If the well is not completed and producing from your section then there is no requirement to pay you. 
Permalink Reply by Bob Ballard on October 27, 2011 at 11:30

Les B

Are you saying that a driller has the right to drill a lateral under an adjacent section without a valid lease? 

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