The Haynesville Is Hot
July 1, 2008
It seems that not a day goes by without some news out of the smoking-hot Haynesville shale. The news flow is downright torrid for such an early-stage natural gas play. Of course, few investors had heard of companies like Goodrich Petroleum (NYSE: GDP) or GMX Resources (Nasdaq: GMXR) before Chesapeake Energy (NYSE: CHK) blew the story wide open back in March. You can hardly blame these companies for flaunting their stuff.
The most typical Haynesville announcement consists of a company updating its acreage position and/or resource potential in the play. Forest Oil (NYSE: FST) delivered exactly that sort of press release yesterday.
The Denver-based E&P reported some dreamy figures -- 90,000 net acres with unrisked potential of five trillion cubic feet of gas. This is a far cry from three months ago, when the company was merely saying "we may have opportunities in the Bossier / Haynesville Shale." This amount of gas -- five "T's" in oil-patch parlance -- is the energy equivalent of more than 800 million barrels of oil. Yeah, that looks like an opportunity, all right.
On Monday, Petrohawk Energy (NYSE: HK) also updated its ever-growing leasehold. Land that's prospective for the Haynesville/Bossier (two gas-rich shale layers stacked on top of one another in the same region) now stands at a hearty 275,000 net acres. This renders Petrohawk highly levered to the Haynesville -- much more than larger companies like Chesapeake or Hunt-happy XTO Energy (NYSE: XTO). This looks like a positive thing, judging by the company's latest well result.
Petrohawk just completed and production-tested its very first horizontal Haynesville well. With a horizontal well, you drill horizontally to hit the gas contained in a laterally extensive formation. Petrohawk drilled this particular well down 11,000 feet, and then nearly 4,000 feet laterally. To better coax the gas out of the rock, the company also induced fractures at eleven separate intervals.
The grand result of all this effort was a monster well, flowing at a rate of 16.8 million cubic feet per day. That beats reported results from both Penn Virginia (NYSE: PVA) and a certain Canadian shale ace. Those are the only other companies that have released production results in the emerging play. When you consider the lack of data and the dramatic share price moves in the space, you'll understand why I'm hesitant to hail the highly Haynesville-oriented hitmen.
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