Increase in cost of Haynesville shale drilling

 

Exco CEO:To Decide On Marcellus Shale Joint Venture In 2 Weeks



By Isabel Ordonez, Of DOW JONES NEWSWIRES

NEW ORLEANS -(Dow Jones)- Exco Resources Inc. (XCO) Chief Executive Douglas Miller said Tuesday the company could announce a joint venture in the Marcellus shale in the next two weeks.

Speaking to analysts at the Howard Weil Energy Conference in New Orleans, Miller said the company is still analyzing its opportunities to enter into a partnership to develop some of its acreage in Marcellus, an emerging shale gas play located in the northeastern U.S.

"I will tell you, the heat is on to make a decision," Miller said.

The executive didn't provide the names of potential partners.

The company already has a joint venture with U.K.-based international energy company BG Group PLC (BRGYY, BG.LN) in the Haynesville shale play in East Texas and North Louisiana. Last year, the European company took a 50% interest in certain holdings of Dallas-based Exco in a deal valued at $1.3 billion.

Miller also said that costs in the Haynesville shale are increasing in the last few months due to the intense drilling activity of companies such as Chesapeake Energy Corp. (CHK), Encana Corp. (ECA) and Petrohawk Energy Corp. ( HK).

The Marcellus and Haynesville shales are rapidly developing natural gas fields.

-By Isabel Ordonez, Dow Jones Newswires; 713-314-6090; isabel.ordonez@ dowjones.com

 

 

Second paragraph from the bottom - what would cause the cost to go up in the last few months unless it is the leasing bonus - if so has price per acre for leasing gone up - last talk in the rumor mill was 6000 - 6500 per acre?

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Permalink Reply by ALongview on March 23, 2010 at 9:14
I think it is the fracking crews and equipment, due to simple supply and demand, that has brought the cost up in the Haynesville recently. I do want to hear about those lease bonuses though. Anyone with any info, please share.
Permalink Reply by Spring Branch,mineral owner on March 23, 2010 at 9:23
Shaleeee, IMHO you are reading something into his comment that isn't there. Like ALongview, I believe Doug Miller was referring to service company costs, including the costs to frac the wells, because of the demand side of the equation.
Permalink Reply by Shaleeee on March 23, 2010 at 9:59
Thanks ALongview and Spring Branch - makes sense - just glad the demand side is good - that is a positive.
Permalink Reply by Spring Branch,mineral owner on March 23, 2010 at 10:40
Keep in mind.........I'm referring to the demand for oil service equipment an services rather than the demand for natural gas.
Permalink Reply by Shaleeee on March 23, 2010 at 13:13
LOL Spring Branch - I wish the demand for natural gas was up! But I was referring to the need for fracing and equipment - I hope that means that inspite of the NG price that the drilling goes on and has not slowed down. Thanks for info
Permalink Reply by S.H.M. on March 23, 2010 at 10:00
EXCO needs to get more frackin' equipment. grin
Permalink Reply by Skip Peel - Mineral Consultant on March 23, 2010 at 10:52
The day rate for rigs has also gone up with the increased drilling schedules.
Permalink Reply by FXEF on March 23, 2010 at 14:08
The day rate may have gone up, but the days to reach TD has gone down. I think most rigs reach TD in 50 to 55 days now.
Permalink Reply by Skip Peel - Mineral Consultant on March 23, 2010 at 14:34
The best barometer of drill cost is feet drilled per day. We usually don't discuss things in those terms but that is the best means to evaluate the cost of the drill portion of well expense. Right now I suspect that the increase day rates and the improved feet per day are about a wash. However the drilling will not slow, it will increase for HBP considerations. And every new contract is signed at a premium to the last. Another one of those Catch 22's that the Play seems to be stuck in.
Permalink Reply by Les Bamburg on March 23, 2010 at 16:40
Skip, the cost per foot has dropped over 40% in the last year just like the drilling time from spud to TD.

There is no indication that rig rates have increased significantly. The number of drilling rigs in the play is flattening and much of the current drilling by some companies is not for HBP purposes but rather to generate earnings.
Permalink Reply by Skip Peel - Mineral Consultant on March 23, 2010 at 16:48
Les, I have read several recent reports that indicate increases in day rates. The question is whether or at what point that increase equals or exceeds the improved drilling rate. The demand may be flattening in the Haynesville Play but it is still growing in others. And IMO will continue to do so for several years. The leasehold to be HBP'ed in the Marcellus alone is substantial.
Permalink Reply by Les Bamburg on March 23, 2010 at 17:12
Skip, just to clarify my comments were only in regard to the Haynesville Shale play rather than any other plays in the US.

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