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Permalink Reply by Skip Peel - Mineral Consultant on August 5, 2011 at 3:00

Yes, but it was in place for a lot of wells and CHK can now spend that buy-out money wherever they choose including supporting their drilling budget.  IMO, the 'testing" phase will go on for some years with not only unit well designs but with innovations in fracture stimulation, bit technology for greater ROPs, etc.  Every operator is looking for the most efficient means to develop their acreage and continuing to tweek their designs.

Permalink Reply by Les Bamburg on August 5, 2011 at 4:06

Skip, "tweaking" and technology breakthroughs are very different than the "testing" phase operators went through during 2009/2010 that has allowed them to select preferred frac designs and well spacing.  Operators would not have embarked on their development plans without having a very good handle on drilling and completion designs. 

Permalink Reply by Les Bamburg on August 5, 2011 at 2:44

HY, I believe Aubrey's statement was more along the lines of reducing rig count in Haynesville Shale to a lower level (~ 15) after their acreage is HBP'd.  I do not recall Aubrey ever saying he would completely halt HS drilling.  Alternate well applications do not necessarily guarantee future drilling activity since it is an administrative step required in advance of actual well permits.  

 

You should see Chesapeake begin to permit alternate HS wells and move to pad drilling mode.  They may also drill a few Bossier Shale wells.

 

By the way natural gas prices will not rise to oil price levels so oil drilling will always be preferred.  In the near term operators do not have sufficient oil drill locations to meet 100% of their earnings growth target. 

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Permalink Reply by essay on August 5, 2011 at 8:26

that's what i gathered from their last conference call, that their intention was to leave 15 rigs in the haynesville for the foreseeable future, and it is my understanding that this means being done with lease-holding activity by year end at the latest.  i've heard sooner but that was second hand.

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Permalink Reply by Les Bamburg on August 4, 2011 at 14:18

AL, many operators have developed acreage positions in other new plays and can will drill the areas that offer the most economic means to grow earnings at their target rate.  For example GMX Resources will discontinue drilling in the Haynesville/Bossier Shale and focus capital and resources on other plays.

 

Some operators (Exco, EnCana, Questar, El Paso, etc) will likely continue with their current rig count levels.  Other operators will drop some rigs over the remainder of 2011 and we will have an indication of the long term Haynesville/Bossier Shale rig count by year end. 

 

By the way many operators had already HBP'd the majority of their acreage and have been in pad development mode for many months.   

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Permalink Reply by tc on August 5, 2011 at 2:49

Then there are companies like Goodrich that want to move to oil (Eagle Ford), but due to JV and non-operated acreage are going to be forced to drill NG.  Yesterday GDP increase their budget $80m and 67% was non-operated NG drilling and completing.  In the CC they stated that they foresee an increase in N LA NG drilling from there partners in 2012.  Small E&Ps with 10-30% WI with some of the large operators, could be faced with the difficult choice of raising capital for low cash flow NG or lose valuable acreage by walking away from their WI.

 

For Leasees that makes who is the operator of their land even more important.  If GDP is spending more capital on non-operated wells that means they have less to drilling on their own operated acreage.  This will apply to most E&Ps as even large ones usually have limited budgets for each area.  As for CHK, they have a JV with GDP in N LA and GDP has the right to drill a limited number of wells each year if they choose so.  I would expect most of there other non-operated acreage also have similiar clauses, so CHK may be spending to keep there WI.

 

 

 

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