from Fort Worth Business Press

Operators: Louisiana’s Haynesville is the new it-shale

BY JOHN-LAURENT TRONCHE
June 16, 2008

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Spurred by the success of the Barnett Shale, many oil and gas companies are seeking new opportunities nationwide – and finding many, including one gas play next door.

In the past few months, two of the Barnett’s largest operators – XTO Energy Inc. and Chesapeake Energy Corp. – have announced their respective debuts in Louisiana’s Haynesville Shale, which runs through about eight northwestern Louisiana parishes – including Bossier, Natchitoches and DeSoto – and parts of East Texas.

XTO Energy announced June 10 it has entered into an agreement to purchase Hunt Petroleum Corp. for about $4.2 billion – a move that will bring the Fort Worth-based energy firm within arms length of Chesapeake Energy Corp.’s efforts in the Haynesville Shale.

In the acquisition of Dallas-based Hunt Petroleum, XTO will acquire properties in East Texas, central and northern Louisiana – the Haynesville Shale – and along the Gulf Coast of Texas, Louisiana, Mississippi and Alabama. The company also will gain about 15,000 acres in the Bakken Shale, in North Dakota and Montana, where it already, separately has acquired about 352,000 acres.

Efforts to sell the company began in 2007 after the death of H.L. Hunt’s heirs, Margaret Hill Hunt and Harold Hunt. Relative have been in a court battle since.

Hunt Petroleum is not affiliated with Dallas-based Hunt Oil Co., which is controlled by Ray Hunt.

The transaction is expected to close by September 2008, and will include a combination of cash and stock worth $4.186 billion.

The properties’ proved reserves are estimated at 1.052 trillion cubic feet of natural gas, of which 62 percent are proved developed, according to the statement. The transaction will add 197 million cubic feet of natural gas, 8,500 barrels of oil and 2,300 barrels of natural gas liquids to XTO’s daily production base.

XTO President Keith A. Hutton called the properties a “super-charged bolt-on” for the company, allowing for the realization of more than twice the allocated reserves, he said in the statement.

“Over the past decade, our team has aggressively developed the tight-gas sands and carbonates of our Eastern Region,” Hutton said. “The Hunt assets overlap and align with our substantial operated positions. Going into this deal, we have identified hundreds of locations to expand recovery and access the multi-pay targets – including the Pettit, Rodessa, Travis Peak, Cotton Valley and Bossier formations.”

Hutton also said the acquired leasehold includes “prime positions” in the Haynesville Shale and James Lime horizontal play.

Until XTO’s announcement, Chesapeake Energy Corp. had been the only major Barnett Shale operator to enter the Haynesville Shale, when CEO Aubrey K. McClendon announced March 25 the company had committed to more than 200,000 acres of Haynesville leasehold; the Oklahoma City-based company recently released a statement announcing further drilling in that shale, based on data that indicates what McClendon said “could be larger than even the Barnett Shale or the Fayetteville Shale plays.”

In Chesapeake’s June 6 update on its Haynesville Shale activity, the company said it now owns or is committed to more than 500,000 acres of leasehold, and recently completed two horizontal wells to join the existing four wells and an additional, upcoming two wells.

The Oklahoma City-based company also said it will continue its leasing efforts in the area, and anticipates at least 12 rigs drilling rigs by the end of 2008, and at least 30 by the end of 2009.

McClendon said the shale’s success prompted the energy firm’s plans to accelerate drilling activity to “generate substantial production growth and capture outstanding financial returns,” according to the press release.

“Our technical analysis of the play over the past two years combined with the impressive drilling results on our first six horizontal wells and wells recently drilled by others in the industry continue to support our assessment that the Haynesville Shale play could potentially have a larger impact on the company than any other play in which we have participated to date,” McClendon said in the statement, echoing statements he made during a March 25 conference call announcing the company’s entrance in the shale.

The bustling activity in the shale even prompted Shreveport Mayor Cedric Glover to travel 220 miles westward and meet with Fort Worth officials on a fact-finding mission; the mayor used the mid-May trip to determine how best to handle the influx of interest in the area, and questions residents and property owners may have, according to news reports.

Meanwhile, shares of XTO and Chesapeake have surged since the announcements.

Chesapeake shares, traded on the New York Stock Exchange under the symbol CHK, have gained about 28 percent since the March 25 Haynesville announcement.

Shares of XTO Energy, also traded on the New York Stock Exchange, under XTO, gained about 4 percent following its own Haynesville announcement.

Contact Tronche at jtronche@bizpress.net