We have faced delays in completions
This is now a theme in the Haynesville Shale. I heard the same from the conference calls from Cabot and Southwestern and you have to assume many more are facing the same delays. The following press release from Penn Virginia sums up the issue. What are your thoughts on how this may affect the amount of gas being sold from the Haynesville in the next few quarters? How might that affect the inventory or in turn the price of gas? Most importantly though how do you think this will affect the cash strapped E&P's that spend to drill but cannot generate any cash flow from that capital expenditure? Will it break the back of the small players?
East Texas -- During the first quarter of 2010, we drilled three (2.8 net) Lower Bossier (Haynesville) Shale horizontal wells, all of which are waiting on completion. Since we resumed drilling late last year, we have faced delays in completions that have resulted in our having an inventory of five wells that are waiting on completion. The delays relate to the scarcity of high working pressure pumping equipment with sufficient rating to stimulate Lower Bossier Shale wells.
We currently have two operated rigs drilling wells, one targeting the Lower Bossier Shale and one targeting the horizontal Cotton Valley. Due to the completion delays and the inventory of uncompleted Lower Bossier Shale wells, after drilling one more Lower Bossier Shale well, we expect to devote both drilling rigs to the horizontal Cotton Valley program. This two-rig Cotton Valley program will continue until the Lower Bossier Shale completion program is caught up, most likely late in the third quarter. Primarily as the result of the completion delays, we have slightly lowered the upper end of 2010 production guidance by 1.0 Bcfe, or two percent.
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Replies to This Discussion
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Permalink Reply by jffree1 on
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Was that from the Southwestern call? I got the same feeling from the Cabot call yesterday that things are bottlenecked in East Texas.
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Permalink Reply by Skip Peel - Mineral Consultant on -
Competition for pumping equipment may contribute not only to delayed completions but to well cost. The pace of the Play could be slowed if average cost per well increases.
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Permalink Reply by ALongview on
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The transcript was from a Penn Virginia press release but I heard it this morning on the SWN conference call....the third time in two days. This is an issue with no end date as of yet because of the number of wells in the queue. If they can't get to the ones that are already drilled then it will just become a longer line as the companies have acreage to hold and will not stop drilling for fear of losing valuable leasehold. That is what makes me think that the cash strapped smaller E & P's will not make it without the much needed cash flow to pay on debt.
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Permalink Reply by Skip Peel - Mineral Consultant on
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The last two quarters of 2010 may very well see a spate of M&As. I'm sure a number of players are poised and ready for the "fire" sales to commence.
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Permalink Reply by Greedy Landowner on
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I think that this is an industry generated excuse to hold leases without producing gas until prices rise.
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Permalink Reply by Jack Blake on
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Jack Blake hopes Shell hits Matthew Murray @21 and then waits for the gas price to come up before producing the well......................
WAIT FOR HIGHER PRICES HOWLED JACK BLAKE
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Permalink Reply by Les Bamburg on
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Al, I would not over-react to these statements since it is really not a significant issue. These companies that are not drilling a lot of Haynesville Shale wells will generally get lower priority access to pumping equipment. Whereas the Chesapeake's, EnCana's, XTO's, etc will probably not experience such problems.
East Texas is very different than Louisiana because the majority of the acreage in the play is already held by production. These companies can afford to adjust their drilling schedules while Chesapeake and EnCana must continue to drill at a high pace in Louisiana. Also, companies such as Southwestern have plenty of cash flow and development opportunities in other gas plays (Fayetteville Shale, Marcellus Shale, etc). Most of the smaller companies have already sold out of the Haynesville/Bossier Shale play as they lacked the resources and technical expertise to tackle drilling these deeper horizontal wells. Most of the remaining companies are well positioned to stay in the play for the long haul.
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