Replies to This Discussion

Permalink Reply by Belmont Boy on March 2, 2010 at 19:08

Skip, I am no "expert," and know just enough about this business to be dangerous! But do have some common sense thoughts about the questions you raise, and would appreciate your thoughts. On the one hand, at least one of the major companies is on record to significantly reduce it's presence in the HA near term. But that company, and others, have thousands and thousands of acres under leases that will expire within the next 12 mos. This is particularly true for east central Sabine Parish. Some seem to think the drilling will wind down. Yet, at the same time, there are 3 pipelines in various stages of construction that would serve north and central Sabine. There is also a major seismic project currently underway that apparently will survey virtually all of Sabine Parish. Thus far, the wells being reported seem to reflect excellent production potential. All in all, a very promising picture; many cheap leases, proven results, an infrastructure to get the product to market, and a new "picture" of the geology just a short time away. Common sense says the "boom" will continue. But, do the companies developing the HA have sufficient reserves to allow them to merely "prove" the field, and then move on to other areas, leaving the reserves more or less "in storage" in the ground for production down the road? All those $100 an acre / 3/16 "company leases" are about to expire, and that senario will never repeat itself. It's just hard for my little brain to comprehend a company walking off from such a birdnest on the ground. I have to think (or maybe it's just hope) the exploration and development will continue, and at a significant pace. Basic business sense tells me that, to do otherwise, would be lunacy. What's wrong with this thinking?

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Permalink Reply by Skip Peel - Mineral Consultant on March 3, 2010 at 2:26

Belmont, for a "non-expert", you make good points. However I am not speculating that HS drilling will slow down. In fact it will increase as many of the leases you mention will be drilled prior to lease term expiration. What will slow down is leasing activity. And prices and a glut of nat gas may retard leasing and expansion of the play while operators seek to balance their production with increased liquids and continue their development of other shale plays. IMO,the HS is the perfect play to prove up reserves and leave them "in storage". No operator will walk away. They will do what the energy markets and Wall Street lead them to do. It is little discussed here on GHS just how stretched operating budgets are for so many of the companies involved in the Play. I am speculating that as the price environment remains stronger for liquids than gas, there will be opportunities for more mineral owners to lease for prospects other than the shale. And many of them will be significantly outside the area prospective for the shale. Will they accept less than "shale money" to lease because they persist in thinking their minerals prospective for the HS? If they do not;, it is likely they will not have their minerals developed and small, independents will have to go further afield to find opportunities to drill.

Would you share with us the specific wells to which you refer?
"Thus far, the wells being reported seem to reflect excellent production potential."

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Permalink Reply by Henry on March 3, 2010 at 7:53

Belmont Boy,
I'm guessing that you are referring to SWEPI with all those cheap leases in east/central Sabine Parish. No one on this site has figured out what SWEPI is planning. Unlike the smaller companies, whose quarterly reports are filled with news of the Haynesville Shale, Shell barely mentions it. It is hard to see how SWEPI will drill fast enough to hold all the leases it has in Sabine. They are an enigma.

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Permalink Reply by GHart on March 2, 2010 at 19:58

As they drill the wells, read the logs, watch the decline curves, etc. they are beginning the process of testing the other horizons to figure out the true extent of the ultimate potential. With the large number of rigs in the area, it would seem prudent to determine some other "home run" possibilities while continuing to accumulate the data still pouring in from the Haynesville. They will no doubt redraw the map from Chesapeake as the data flows in. The Exxon purchase of XTO possibly represents a paradigm shift in management philosophy from the independant's strategy of drill, drill, drill, to a more cautious approach of gathering data for a long term laying in of billions of dollars of investment. The infrastructure being built right now is indicative of a very long term play. These guys don't think 3 years out; they think 30 years out. Gas is coming on strong, even with the lobbying of oil and coal, gas won't be a sleeper much longer; we have too much of it to ignore, and the long term implications of that are a 6 hour conversation that I would love to have sometime.
What are some of your theories?

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Permalink Reply by Spring Branch,mineral owner on March 2, 2010 at 21:39

In the last week, there have been 16 wells permitted onshore Louisiana that were not targeting the Haynesville....3 in Cameron, 2 in Claiborne, 2 in Evangeline, 1 in LaSalle, 1 in Plaquemines, 1 in Richland, 1 in St Landry, 1 in St Mary (21,430'), 2 in Terrebone, 1 in Vermillion, amd 1 non-Haynesville in Webster. Someone must think there is opportunity drilling wells other than in shale. Other than one of the Terrebone wells being drilled by Apache, the other wells are being drilled by small non-public companies that most of us have never heard of. This is simply an example of O & G companies drilling prospects where they have leases. Apparently they are not afraid of the economics and proving it with the drill bit.

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Permalink Reply by The_Baron on March 3, 2010 at 8:40

except for a few of the personalitites in the Lafayette Conservation office.....

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Permalink Reply by Skip Peel - Mineral Consultant on March 3, 2010 at 2:34

GHart. Without a national energy policy, and strategy, that emphasizes natural gas, I am unsure if shale gas plays will continue their momentum in a world economy, not to mention our own, that is crippled and not showing much sign of a rebound. We have been talking about the inevitability of increased domestic nat gas use for two years now and it hasn't happened. I hope you are correct the nat gas will not continue to be a "sleeper". I just don't see any substantive changes in national energy policy on the horizon. IMO partisan politics preclude it.

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Permalink Reply by ken hatcher on March 3, 2010 at 3:15

I agree with you somewhat. However with the jobs it will create and no such thing as clean coal the movement will improve. I read earlier that no. sabine county has a mixture of wet gas and oil and I think across the lake in the pendleton area would be likewise. You raise a interesting point, would a land owner think he was being hoodwinked and take less bonus than someone just up the road. hmmmm

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Permalink Reply by Skip Peel - Mineral Consultant on March 3, 2010 at 3:20

And I'm not talking about Sabine, parish or county, ken. I am referring to areas outside the boundaries of the HS Play as currently defined by unitization activity by more than a mile or two. And including areas already defined by existing, completed HA wells. Just read some of the posts on the Arkansas, Claiborne and Grant Parish Group pages.

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Permalink Reply by ken hatcher on March 3, 2010 at 3:38

Yes, I understand what you mean.But should the majors decide say the play was not feasible much past zwolle then it would be a mile or two or more south. I guess people would have to realise they were outside.

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Permalink Reply by Skip Peel - Mineral Consultant on March 3, 2010 at 3:57

It is a logical statement that, "The HS, or the producible HS, does not go on forever." And it is human nature to indulge in optimistic expectations. All mineral owners decide what to believe and how that belief informs their decisions. I think that it is likely that their will be at least one tier outside of the core. Portions of north Caddo and Bossier parishes have already been included in that tier through the results of completed wells. It was a rather abrupt change of direction. There were a number of HA wells by four to six operators including Chesapeake, reports of 300' thick shale and high expectations. Those expectations proved unfounded. And although the HS is productive in that general area, it is not economic at current or foreseeable future prices. The same scenario will play out on the eastern and southern boundaries although the south may prove to be a consequence of extreme heat and pressure rather than the petro-physical characteristics of the shale there. If so then future improvements in drilling and completion technologies may extend the play. So much of the future is reliant on the question of economics. If an energy company can find and develop an mcf for X in one play, why would they spend 2X to produce an mcf elsewhere. Simple answer, they will not. In another two to three years the comparisons of economic production between the major domestic shale plays will be made obvious.

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Permalink Reply by Kevin Smith on March 3, 2010 at 5:51

Sorry to ask without looking at older topics, but what is the generally accepted break-even-cost-per-MCF of producing from HA? Thanks.

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