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Permalink Reply by DJG on February 3, 2010 at 7:15

A few main interesting/main points covered:


A. 2010 & 2011 drilling will be primarily driven mostly by need to hold lease acreage.

B. Still estimating a 7.5 BCF/Well EUR for HS wells and 5.5 BCF/Well EUR for Bossier wells.

C. $1.45 Billion budget for drilling in 2010 - $900 million of which is targeted at HS/BO wells.

D. 20% of EUR realized during 1st year and then 80% of EUR by the 10th year.

E. Currently testing using restricted flow rates on some well to determine effect on whether EUR is improved. Says they will release more info on those test in the next "month or two"

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Permalink Reply by Spring Branch,mineral owner on February 4, 2010 at 0:16

So if an existing well produces 3 billion cu ft in the first year, that represents 20 % of the EUR, which would ultimately be 15 Billion cu ft? Your thoughts, Les?

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Permalink Reply by Les Bamburg on February 4, 2010 at 4:40

SB, where are you seeing 3 Bcf & 20%? The graph shows 2.5 Bcf which is 33% of the EUR of 7.5 Bcf.

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Permalink Reply by DJG on February 4, 2010 at 5:04

I noticed the difference as well.

The 20% was what was referred to by HK/CEO Floyd Wilson in the webcast (included link) for the Credit Suisse presentation, but their graph represents a different %....

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Permalink Reply by RBH on February 4, 2010 at 5:11

http://news.moneycentral.msn.com/ticker/article.aspx?Feed=FOOL&...

another interesting article
The Results of Petrohawk's Spending SpreeFebruary 3, 2010 4:35 AM ET

Toby Shute


In 2009, Petrohawk Energy (NYSE: HK) spent about $450 million amassing leasehold in shale plays like the Haynesville and the Eagleford. This land grab was partially funded by the sale of new shares -- first in February, and then again in August. The company had more than 300 million shares outstanding by the time of its third-quarter filing, representing a 20% increase in one year. (The company's year-end financials won't be filed for another few weeks.)

Monday's operational update naturally focused on the sausage, rather than how that sausage was made. Petrohawk boosted its daily production by 76% over 2008, and proved reserves shot up by 122%, to 2.75 trillion cubic feet of gas equivalent. That's a fine-looking sausage.

While Petrohawk's reserves doubled, the firm's percentage of proved developed reserves dropped from 54% to 33%. This is the inverse of Chesapeake Energy (NYSE: CHK) at the end of 2008, which had only 33% proved undeveloped reserves (PUDs). Petrohawk thus suddenly finds itself in what I've typically considered PUD problem territory.

How did the company end up here? The new SEC rules for reserve reporting play a big part. Operators were formerly only allowed to book direct offsets to a proved developed location. They now have more discretion. Petrohawk, for example, has booked a 3:1 ratio of undeveloped locations to developed Haynesville locations. In the Eagle Ford, the ratio is around 5:1.

Shale plays are highly predictable and repeatable, so these may well be conservative assumptions on Petrohawk's part (and on the part of its top-flight reserve evaluator Netherland, Sewell). Either way, it looks like PUD bookings are going to explode among shale players ranging from Atlas Energy (Nasdaq: ATLS) to Quicksilver Resources (NYSE: KWK).

Another salutary effect of the new SEC rules is that Petrohawk's drill-bit finding and development costs have dropped like a stone. Under the old rules, F&Ds would have been reported at $1.32 per thousand cubic feet equivalent (mcfe). Under the new rules, they come in at $0.68/mcfe, which is what Range Resources (NYSE: RRC) reported as well. I believe this is a direct result of higher PUD bookings, which do not reflect future development capital (Petrohawk's stand at $3.18 billion).

The new rules didn't entirely go in Petrohawk's favor. The pre-tax, discounted net present value of the firm's reserves (PV-10) was reported at just $1.5 billion, while it would have been $4.4 billion under the old rules. Low average natural gas prices this year hit the firm hard in this respect.

Basically, everything is now a little topsy-turvy in oil patch accounting land. I'll try to help you make sense of it all as we get further into reporting season.

Copyright 2010 Motley Fool

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Permalink Reply by Les Bamburg on February 4, 2010 at 8:57

SB, I have two possibilities for Floyd's statement:

1) He mis-stated as the 1st year production is closer to 33% of the EUR (2.5/7.5); or

2) In reality Petrohawk believes the EUR will be closer to 12.5 Bcf (2.5/20%).

You can pick one.

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Permalink Reply by DJG on February 4, 2010 at 9:17

My guess is that it was a mis-statement, as he did say in the next sentance that the EUR after 10 years would be at 80%.

According to the slide, the EUR is showing 6.0 BCF at the 10 year point - which if the 80% figure is correct - would project to the 7.5 BCF EUR listed.

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Permalink Reply by Spring Branch,mineral owner on February 4, 2010 at 11:26

BUT............ that 7.5BCF EUR is only an average EUR for Petrohawk's acreage in the Haynesville. If the 20%/80% at the one year/ten year rule of thumb holds up for their "average" 7.5 BCF EUR well, then it might hold up for all the wells that go into making up that "average". If a Petrohawk well has actually made 3 BCF in it's first 12 months of production, and the 20 % rule of thumb for first year production holds true, then it would not be unreasonable to assume that this particular well has an EUR of 15 Billion cu ft. Somewhere in the presentation an EUR range for actual wells of 4-12 BCF per well is mentioned. I would assume they would rather under-promise and over-deliver.

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Permalink Reply by Spring Branch,mineral owner on February 4, 2010 at 11:44

Upon further study of the chart, and though I'm pretty sure Floyd said 20% of the EUR would be produced in the 1st year, it does in fact appear that it is 33%/80% in the one year/ten year timeframe which would mean that a well that produced 3 million in its first 12 months would have a 9 BCF EUR. Big difference between 9 Billion EUR and 15Billion EUR!!!

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Permalink Reply by Carter on February 4, 2010 at 11:49

The new yellow glob in East/Central Shelby is from HK's acquisition of 20% working interest from some of Rosetta Resources leasehold around Byrdtown/Carrolltown/Boles Field. A lot of that is National Forest longer term leases. A good bit might be HBP as well as that is Huxley Deep Unit Area with Newfield as operator.

HK is also leasing along peripheral of this area.

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Permalink Reply by RBH on February 4, 2010 at 11:54

In Shleby, the most western yellow acreage is JV with Noble Energy and the eastern "yellow glob"
is their nonoperated position with Newfield.

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