FROM OIL AND GAS INVESTOR

Haynesville Play 80% Leased; Bossier Expands Potential: Petrohawk’s Wilson
Article By Steve Toon
Published Jun 11, 2008 Print E-mail


Haynesville-shale player Petrohawk Energy Corp. is “well beyond” its last announced position of 150,000 acres in the play and overall leasing in the play is 80% complete, according to president and chief executive Floyd Wilson, but the emerging Bossier formation potential could expand the play even further, he predicts.

Wilson spoke at Oil and Gas Investor’s Energy Capital Investment Symposium in Houston on Wednesday.

“We’ll buy all the quality land that we can,” he said. “You don’t get an opportunity like this very often. We’re right in the middle of it, we already have a lot of land and we want more.”

Already the company is in a position to drill for decades, he said, and not “ratty” locations where success is hit or miss. “These are places where we can drill thousands of wells with no dry holes.” Petrohawk has three rigs running at present and plans to have 10 by year-end.

The company is estimating reserves of 5 billion cubic feet per well at a well cost of $6- to $7 million with 50 billion cubic feet recoverable per section. With production tests on eight wells, Wilson said the recoverables “calculate better per section than the Barnett does.”

Since April lease costs have escalated to $10,000 to $15,000 per acre for a typical three-year, 75% net-revenue-interest lease and into the $20,000s for deeper rights extending beyond the three-year time frame.

And do the economics of the play justify such lease costs? “For sure,” he said without pause. “We haven’t seen anything yet to dampen our enthusiasm for the play. Hence our spending activities over the last month or two increasing to hundreds of millions of dollars per week.”

Growing data on the Bossier formation, however, which lies just above the Haynesville shale, is adding a new facet to the play, he said, possibly expanding the size of the play south in Louisiana and further west into East Texas beyond the boundaries of the Haynesville. The Bossier comes into play where the Haynesville gets thin and could be just as good as the Haynesville.

Although some reports have interchanged the terms for the Haynesville and Bossier trends as synonymous, Wilson makes a distinction that they are overlapping but separate trends.

“The Bossier is just picking up speed and may double the size of the overall area,” Wilson said. “The Bossier seems to be very real, all the way over to Rusk County” in East Texas. “It’s going to go quite a ways over there.”

He said Petrohawk will continue leasing as far west of the northern Louisiana epicenter of the play as research indicates. “Our focus has been the Haynesville and it still is, but we have certainly shifted gears over the past two months to try to pick up leaseholds in the Bossier play as well.”

Some East Texas lease holders targeting the James lime and Travis Peak trends are “looking pretty prospective now for Bossier,” he adds.

Wilson said the play is breaking so fast that it will likely cause bottlenecks in rigs and takeaway capacity in a year or so. He expects 100 rigs running by mid 2009, up from five at the beginning of 2008, and horizontal rigs with top drives are becoming scarce.

“You’re looking at a huge traffic jam of people hauling rigs up into this area over the next couple of years.”

Getting the anticipated gas out of the area and into an interstate pipeline is going to be an issue as well. If you’ve got a lot of wells coming in at 5- to 15 million cubic feet a day, you could get this field up to a Bcf (billion cubic feet ) a day rather quickly. If it gets to a Bcf, we don’t believe there’s that much capacity there.”

Another pipeline will need to be built to handle the capacity, he said, as the existing infrastructure is currently close to capacity transporting Barnett shale production through the region.