Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 24, 2014 at 4:55

Thomas, Haynesville gas will compete with supplies from other plays that have pipeline connections to the Gulf Coast.  Haynesville production will have the advantage of proximity to end users over other supply sources.  Lower transportation costs will help Haynesville gas be competitive but the more important factor is the cost per mcf to the buyer.  The cost to produce an mcf is higher in the Haynesville than in some other plays with the Marcellus probably providing the most competitive source of supply.  If the price of Marcellus gas including the transportation cost is lower than Haynesville, it will get much of the market.  Pricing variables will change over time and end users will buy the bulk of their supply from the lowest cost source.  Until the Marcellus has pipeline connections to more markets in the NE much of that gas will come south.

• ▶ Reply

Permalink Reply by Thomas L. Trippe on October 24, 2014 at 5:52

Thanks for that information Skip.  I have a number of HA wells in Section 26 - being produced by J-W.  Am I correct that production from these wells will be, at least in part, piped to some kind of LNG conversion facility on the gulf coast?  Thanks.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on October 24, 2014 at 6:04

Thomas, at this point I have not seen any information that would indicate an agreement between J-W and any LNG export facility.  It's entirely possible that some of your gas would go to the coast for LNG export but there is no guarantee that will occur.   Regardless of how much Haynesville gas goes for LNG export most industry pundits do not see substantially higher prices.  I think most predictions are for relatively stable prices in the $4.50 to $5.50 per mcf range over the next decade.  That should be enough to support development drilling in Core, Tier 1 and some Tier 2 Haynesville rock.

• ▶ Reply

Permalink Reply by Thomas L. Trippe on October 24, 2014 at 6:50

Skip,  Thank you for this information too.  I am more than happy the way it is and especially with J-W.  We will see how the LNG plays out.  Len

• ▶ Reply

Permalink Reply by W. Carter Richardson on October 24, 2014 at 8:46

Skip do you have any of the most current maps for Tier 1 and Tier 2?

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on October 24, 2014 at 9:17

No.  There has not been one since 2012.  There is really no need for one with 2394 completed wells reporting across the expanse of the play.  Anyone can use SONRIS Lite to calculate their category.

The average HA horizontal well (not an HC, or Cross Unit Lateral) will produce about 80% of its lifetime production in the first 24 months.  There are exceptions to any approximation but it's a decent rule of thumb.  So total up the first 24 months production on SONRIS Lite and divide by 4.  Then add that to the 24 month total and you have an approximation of what that well will produce over its life span (no re-fracs).  Core rock = 8 Bcf or greater so 6.5 Bcf or more would be the 24 month total.  Tier One = 6 to 8 Bcf so 4.8 Bcf to 6.4 Bcf at 24 months.  Tier Two = 4 to 6 Bcf so 3.2 Bcf to 4.7 Bcf at 24 months. Tier Three would be any well less than 4 Bcf.

Keep in mind that excepting mechanical problems the average well cost (not HC) is in a narrow range across the play based on TVD (True Vertical Depth).  Deeper TVD wells slightly more expensive than shallower TVD wells.  The HA operators have driven the cost to produce an mcf down to a point where the odds are not good that any big reductions remain a possibility.  So now the determining factor for what areas get developed is largely the price of an mcf.  We should end the year with a monthly average around $4.50/mcf.  That price would appear to make an acceptable profit based on what we are seeing in the way of new wells in Core and Tier One areas.  The price required to make Tier Two and Tier Three rock profitable to drill is beyond my pay grade.  Disclaimer: I Am Not A Reservoir Engineer. 

• ▶ Reply

Permalink Reply by W. Carter Richardson on October 24, 2014 at 18:50

great answer.  let me know when you head to Maui.  I'll take you and family to dinner.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on October 25, 2014 at 2:11

Thanks, Carter.  I rarely make it any further than Toledo Bend these days.

• ▶ Reply