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Permalink Reply by ledlights on October 30, 2010 at 6:00

Within the last year or so (if I recall correctly) Encana said that they were one of the lower cost producers of shale gas in the Haynesville and were going to drill quite a bit even with low gas prices (I believe NG prices were well down into the $4 dollar range at that time). They said they could better afford it and would like to drive outfits that couldn't out of the Haynesville which would result in a consolidation of the HS producers. I guess that NG prices have now reached Encana's pain threshold too. I wonder how stressed some of the E&P's with shallower pockets are now. Are there more current candidates for consolidation of property in the HS?

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Permalink Reply by Henry on October 30, 2010 at 6:03

VSC,
Don't hold your breath. By my count, EnCana/SWEPI has about 430 units in the Haynesville Shale. At 8 wells/section, that comes to over 3000 possible wells. (And I haven't even counted Mid-Bossier here.) Once they ever start to drill for a profit (as opposed to holding leases), they will likely do it section by section. So some sections might get done sooner, but others will wait a very long time.

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Permalink Reply by Robert Duke on October 30, 2010 at 7:03

Well, I am generally the pessimist, but I am wondering if anyone else sees some credence in a couple of optimistic points: 1) Haynesville shale wells seem to produce at about 5x a higher rate in the first year than subsequent years, so pushing to get HBP in a couple of years produces a heck of a spurt of gas that then drops pretty rapidly, so combined with a bit of increasing demand, the oversupply problem may not last forever (I am also assuming that we are approaching over 50% HBP on the LA side - SONRIS seems dead at the moment, so I am not sure), and 2) while Encana is pushing "gas factories", or at least "gas pads", there would be a bit less risk, though certainly it would cost a bit more, to fill in wells on the pads in small increments. This gives you an opportunity to optimize your methods, and get your spacing better optimized, I would think (I have no work experience with this, so please feel free to educate me on this one). I know the companies are going to be less concerned about their royalty owners than their own bottom lines, but for royalty owners, it is obviously much better to get a new well every couple of years than 8 all at once, from the taxation end of things, and assuming that the price of NG will increase with time; it is also helpful to not have to wait a decade or two before you get any additional wells :-}

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Permalink Reply by Les Bamburg on October 30, 2010 at 7:51

VSC, the rate of growth of natural gas as a transportation fuel is consumer driven and not controlled by the petroleum industry. Realize most members of the "petroleum" industry (ExxonMobil, ConocoPhillips, Shell, BP, Total, Statoil, etc) have big positions in US natural gas and would benefit by increases in NG consumption. A reduction in US gasoline consumption would not impact profits from oil production as international demand will continue to drive up the price.

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Permalink Reply by essay on October 30, 2010 at 9:27

http://www.afdc.energy.gov/afdc/laws/laws/LA/user/3261


Compressed Natural Gas (CNG) Bus Feasibility Study

The Louisiana Department of Environmental Quality and the Department of Transportation and Development must conduct a study on the feasibility of using buses fueled by CNG in mass transit applications and report their findings to the Louisiana Legislature before December 31, 2010. (Reference House Concurrent Resolution 184, 2010)

Natural Gas Support

The Louisiana Legislature urges the governor to develop proposals and take action to leverage natural gas as a primary transportation fuel for Louisiana residents and businesses. Because natural gas is less expensive than gasoline, it would allow the state to increase the fuel tax to fund necessary transportation infrastructure projects while still resulting in significant cost savings for customers. (Reference House Concurrent Resolution 115, 2010)

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Permalink Reply by VSC DeSoto South on October 30, 2010 at 13:39

I agree that the demand at the consumer level is needed.
The real catalyst to raising consumption of NG is the transition to NG to fuel power plants and heavy equipment, and larger freight trucks. Consumer persuasion is not required. It is easier to convince clearheaded intelligent business people the timeliness of switching in simple dollars and sense.
The American consumer is, I hate to say it, a sheep. They go with safe, The only way to get them to try something different is billions in marketing, the NG are not into or inept at marketing.
Why would anyone in their right mind have ever bought a blue ray player, dvd's were fine, if it weren't for marketing we would not know what a blue ray disk is.The picture is better on a blue ray, but that's irrelevant :). I crack myself up. Does anyone remember the beta max, not many. Why? Because the VHS format was what was in front of your face as the end all be all. Marketing.
So I don't disagree with you, I just think there is another way to drive up consumption and demand for the gas.
Do you only use tomatoes in salad? No, you use it in sauces, hot dishes, side dishes...so, automobiles are not the only way to go.
We have to absorb the over supply to make the price go up somehow. right?
Petroleum companies are involved but i think it is really to contain the development so there is little disruption on their stranglehold on the energy industry in general. Who's to say some of the doom and gloom about NG is not funneled in the back door by some of their PR companies.
I'm just saying.
Detroit did not like the electric car in the 60's either.MMM, I wonder what that was about? err...control of the transportation industry? Kill off the competition?
Eventually my section will be drilled out, one day, 1 well for right now is better than none.
Having dreams keeps my head looking up anyway.

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Permalink Reply by Jack Blake on October 31, 2010 at 3:00

Jack Blake hopes they do not drill thew second well in his section until NG is at $10.00/mcf!!!!!
BIGASSROYALTYCHECKSFORTHELANDOWNERSHOWLEDJACKBLAKE!!!!!!!!!!!!!!!

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Permalink Reply by little ole 1st grade teacher on October 31, 2010 at 4:18

I like your idea of $10.00/mcf, but how long will this take. And when will the O & G companies start leasing again? Soon I hope.

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Permalink Reply by little ole 1st grade teacher on October 31, 2010 at 4:16

Well said, VSC.

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Permalink Reply by little ole 1st grade teacher on October 31, 2010 at 4:02

Dear VSC,
At least you have one well. There are some of us who have none.
I was promised over 3 years ago that I would be able to retire by 2007....Here it is 2010 and nothing.
In fact, I no longer have a lease and as it sits now, no promise of one in the near future. I was told that my property was in a HOT BED of Natural Gas.....Gee, I wonder what happened to all the excitement.
It seems that I have all ready been tricked some 3 years ago...So much for Halloween.

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Permalink Reply by P.G. on October 31, 2010 at 4:23

Maybe you should feel fortunate they are saving your land to lease for when NG IS $10.. Royalties now are mere peanuts....

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Permalink Reply by Jack Blake on October 31, 2010 at 4:32

That's what I'm talkin' about said Jack Blake. You are still in a hotbed of NG and don't forget it! The price of NG will eventually rise and you will be released. Hopefully it'll be another feeding frenzy and many Shalers will have much more knowlege to deal with the landmen. Jack Blake thinks the O & G's can not make a profit in the HS at $3.00 gas with the current available technology.
What is a gas price that the O & G's would drill and produce HS gas if you do not take into account having to drill to get leases HBP?
JBHASPOKEN

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