Tuesday held the promise of the big show though. The Haynesville, Marcellus, Barnett, Eagleford, Aubrey McClendon, Dick Stoneburner; these were what everyone had come to hear about.

After grabbing a few breakfast burritos and a coffee at the Fort Worth Convention Center, I sat down to hear the opening speaker of the conference, a Mr. Richard Kolodziej, President, Natural Gas Vehicles for America, whose topic was “Driving Natural Gas Into the Future.”

NGVAmerica is a national organization dedicated to the development of a growing, sustainable and profitable market for vehicles powered by natural gas or hydrogen. NGVAmerica represents more than 100 companies interested in the promotion and use of natural gas and hydrogen as transportation fuels, including: engine, vehicle and equipment manufacturers fleet operators and service providers natural gas companies and environmental groups and government organizations. Richard was able to provide a national perspective and give an update on the growing number of OEM heavy duty suppliers.

Most companies involved in the natural gas industry realize the vital importance of increasing demand for natural gas in the future to keep business models economical in the shale plays. Exploration & Production (E&P) companies have done an outstanding job tapping into new gas reservoirs in these unconventional plays. However demand has lagged, which is why we have seen lower gas prices in the past 2 years.

Kolodziel shared with the audience that there has been some ground gained over the past year in terms of the future of NGV’s and there place in US industry. The government is finally beginning to recognize the value of NGV’s and natural gas. In 2009, the Federal Natural Gas Caucus was formed. This is the first Federal Caucus formed specifically to target promotion of natural gas in the US. In short, after 5-6 years of unprecedented growth in natural gas production by E&P companies, the folks in Washington seem to be finally waking up and smelling the coffee; realizing that perhaps, one of the key ingredients to weaning ourselves from Middle East imports might be sitting under our feet here in the US.

Next, Jen Snyder, Head of North American Gas Research, Wood Mackenzie, spoke on “The New Big Picture” of natural gas and shale plays in North America. Wood Mackenzie is a research and consultant group to many major independents in the petroleum industry.

Wood Mackenzie’s research has found that each respective shale play ranks differently in terms of the economics on gas wells. Here is how the shale plays stack up against each other in terms of the economic potential (#1 means most economical).

1. Marcellus & Barnett

2. Fayeteville

The next speaker was Michael Hall, Sr. Analyst & Vice President-Exploration & Production Research, Wells Fargo Securities, LLC. Highlighting his talk were the following evaluations of each of the unconventional plays:

Fayetville Shale: Steady as she goes

As time had progressed most of the shale plays are becoming more and more economical with drilling experience and innovation, however, one thing remains certain according to Mr. Hall in the long term economics of these gas shale plays:

Olivier Lazare, VP of New Ventures and Business Development for Shell Upstream Americas, spoke on some of the new deals being cut in the shale plays by many of the large independents with majors from across the globe.

An example of this type of deal can be seen in Chesapeake’s deal with Total executed in 2009 in the Barnett. Essentially, a company like Total buys into CHK’s acreage position for up front cash and certain carried drilling interests. This is beneficial to CHK as it spreads out their risk and gives them cash to drill new wells. It is beneficial to Total, as they are able to learn the technologies needed to drill in unconventional areas which they can take back home in the years to come and see a return on their investment.

It appears there will be more and more of these deals popping up in the future, as many foreign companies are eager to learn what the pioneering American companies are doing to have so much success. On the flip side, the large American independents need the additional capital to execute their drilling programs with the massive amount of acreage they currently have under lease. It is a win-win most of the time for the groups involved.

On a side note, I also learned through his talk that Shell has recently made a deal with China to explore the shale plays of China. With this in view, I would not be surprised to see China getting more involved in our shale plays here in the US.

Next, Richard K. Stoneburner, President and COO of Petrohawk Energy Corporation and Tim Dove, President and COO of Pioneer Natural Resources talked about the Eagle Ford Shale with attendees.

Some of the highlights from Stoneburner’s talk include:

-Only a year ago Petrohawk discovered its “Hawekville Field” in South Texas

Both CEO’s touted the Eagleford as being “drill friendly” with a good infrastructure already in place, making it an attractive area to drill for operators.They feel the Eagle Ford has
a great deal of potential in the years to come.

After their formal talk, I followed the pair into the press room for some follow up questions. I asked Mr. Stoneburner if Petrohawk’s strategy had changed in the past year regarding the choke sizes they were using in the Haynesville. He told me that they were finding that choking wells back to certain levels could actually increase overall Estimated Ultimate recoveries (EUR’s) in units. This strategy appears to be working well for groups like Petrohawk and Chesapeake in the Haynesville.

After lunch break, Chesapeake Energy Corp.’s CEO, Aubrey McClendon, sat down with Hart Publishing’s chief editor Leslie Haines, for a "Shale-Side" Chat.

McClendon’s interview had the following highlights:

-Hedging has been a very important strategy for CHK in keeping profits healthy

got a big laugh out of the crowd

After his talk, Mr. McClendon then headed back to the DUG press room and went on a live interview with CNBC. We were not able to sit in for this, but watched most of the live broadcast on televisions outside the main hall. The CNBC anchor asked a few standard questions, and seemed a bit out of touch with what is actually happening in the petroleum industry.

The remainder of Tuesday’s talks were filled with more technical data and drilling techniques across the various shale plays.

Wednesday morning’s chat started off with an Operator Spotlight on the Haynesville Shale. Gerry Blackshear, Geosciences Manager at Comstock Resources Inc. and Hal Hickey, Vice President and Chief Operating Officer of EXCO Resources, Inc. spoke on their company’s positions in the Haynesville Shale. EXCO has had tremendous success in its position in the Haynesville in Louisiana, with average IP’s coming in around 23 MCF. Comstock is having similar success in its areas, which include some of the more southern portions of the play on the LA side.

Mr. Hickey and Mr. Blackshear sat down in the press room to answer questions for the public.

Mr. Hickey was asked about EXCO's current spacing strategy and he stated that they “are sticking to 80 acres spacing in their Louisiana Units at this time.”

When asked “Given low gas prices, can, or should you relax?” Hickey stated “In areas where we are meeting our minimum rate of return, we’ll keep drilling.”

Question: “Is there a gas price that would be a trigger point to shut down operations?”

Hickey: “Depends on which part of the play you are talking about. In our Harrison County acreage, I think you need to have at least $5 gas to make it work. In DeSoto Parish, low $3 gas still works for us.”

Hickey: “The market tends to correct itself. Companies will do what makes economic sense at the time.”

Question to Mr. Blackshear: “Why is Comstock still only booking 5 BCF per well in the Haynesville? Isn’t that a bit conservative?”

Blackshear: “We have always
wanted to stay conservative on our ER’s (Estimated Reserves)

Question: “How much are current costs with drilling?”

When asked about Devon’s Kardell well in San Augustine County, Texas, Hager said that they believe the Kardell and wells in the vicinity will have a 6 BCF EUR potential. He would not divulge what the rate the Kardell was currently producing, but that it was producing well, though it had dropped off quite a bit from its initial production.

Austin Eudaly

Austin.Eudaly@gmail.com