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Permalink Reply by HBP on February 16, 2013 at 13:18

The Haynesville Hangover should be a follow up documentary. The discussion here was also applicable in a separate thread on Exco who has drilled a good bit at low prices for similar reasons.  The debt treadmill means some of these companies have to sell something even if the margins are not as ideal as they were at a $5-$6 price. 

When you wake up with a hangover, you can try and heal up or you can pour a bloody mary and kick the can down the road. 

But, is some of this new drilling so they can satisfy their obligations on the Nucor-Encana joint deal?  I only read the press release on that last year, so wasn't sure of the details

Permalink Reply by Skip Peel - Mineral Consultant on February 16, 2013 at 14:02

You may be right, HBP.  I thought the Nucor deal wouldn't require any drilling until the new LA facility was up and running.  If it's on schedule that may be sooner than I thought.  From the Nov. 6 Nucor News Release:

The agreement will ensure a sustainable competitive advantage in natural gas costs for Nucor's direct reduced iron facility currently under construction in Convent, Louisiana, which is on track for startup in mid-2013 and will significantly increase Nucor's usage of natural gas.

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Permalink Reply by adubu on February 16, 2013 at 16:03

Did you see news on XCO selling conventional oil & gas assets shallow rights above cotton valley across west texas going east to north part La for $725 million. Selling into a partnership with  the harbinger Group. XCO also had to buy out BG's interest their joint partner share for $132.5 million of the shallow rights.XCO kept all deep shale acres in Haynesville play

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Permalink Reply by Skip Peel - Mineral Consultant on February 16, 2013 at 16:12

Thanks, adubu, EXCO contributed their rights to the Cotton Valley and shallower formations, a portion of which they just purchased from BG, to a partnership and got some cash in return.  It'll be interesting to see what becomes of these conventional assets.

http://www.excoresources.com/single-news-release.htm?regid=1785589

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Permalink Reply by adubu on February 16, 2013 at 16:18

SKIP--no question in time they will develop these assets for the CV is low hanging fruit to drill when prices return they have all acres HBP I would think.

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Permalink Reply by Skip Peel - Mineral Consultant on February 16, 2013 at 16:29

EXCO may not be able to wait.  The question is, are the LA CV assets sufficiently wet to be economic now?  EXCO needs some non-HA cash flow whether it comes from their own operations or participation as a Working Interest.

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Permalink Reply by adubu on February 16, 2013 at 16:41

Has CV or shallower formations in La production have much condensates? East Texas has some that of course varies well to well. In texas more in Travis peak and Pettit than CV. Some formation above CV are commercial oil but very minimal to none of CV are commercial oil. Miller the CEO tried to take EXCO private at 18.50 about 2years ago and could not get the 4.4 billion financing he need and with stock at <$7 he may try again few years at lower price if he can get debt of companies balance sheet down

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Permalink Reply by Skip Peel - Mineral Consultant on February 16, 2013 at 16:56

Condensates are not the important economic component of the hydrocarbon stream in a wet gas well.  It's the Natural Gas Liquids (NGLs) that make these wells economic.  

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Permalink Reply by adubu on February 16, 2013 at 17:11

skip --Agree but Ethane prices are fairly low at present only about $22 but propane better at mid $70s so NGLs prices not the best presently ----most CV over my way in Texas basically drill as gas wells with small amount of NGL and Condensate are nice extras but nothing like the true wet gas wells like in the eagle shale field. Have seen drilling in CV now mostly H rather than V drilling

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Permalink Reply by Skip Peel - Mineral Consultant on February 16, 2013 at 17:31

Sufficiently wet gas can run to about $12 per mcf.  They make good wells.  In fact if you look closely at plays like the Eagle Ford you will notice that the most profitable wells are not high up in the Oil Window.  They are in a relatively narrow band where the Oil Window meets the Wet Gas Window.  That's owing to better formation pressure.  Many wells spoken of as oil wells are actually wet gas wells with 15 to 35% oil in the hydrocarbon stream.

Permalink Reply by Mattie on February 18, 2013 at 14:55

Per their recent (2/14/13) investor presentation, the driver is their revised estimates of up to 18 bcf per well due to their "sweet spot" acreage, improved drilling techniques, and lower "per section" drilling costs by improved utilization of their super-pads. They are promoting 6 wells per section with 7,000'+ laterals.  Sounds aggressive to me, but positive information nonetheless (from an EUR perspective)...not so positive from the perspective of current gas glut.  Final thoughts - the analysts aren't buying it just yet, but it definitely was a "news maker" for the Haynesville Shale play given the poor gas price environment and the sexier "wet gas" plays that continue to make the big headlines. 

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Permalink Reply by kittycatmama on February 18, 2013 at 15:19

Encana has a lot of leases in the Holly Field. I just finished reading an article that Exco is coming into Holly Field with a JV to drill the CV with horizontals. I just wonder if maybe Encana is coming back in to drill the CV instead of the Haynesville. Anyone have any thoughts on that?

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