NATURAL GAS: 40 RIGS CAN MAINTAIN HAYNESVILLE PRODUCTION PLATEAU - SeekingAlpha article - August 7, 2012

by Richard Zeits

The key argument often used by natural gas bulls is that the dramatic reduction in rig counts in the dry gas producing shales will translate into a rapid drop off in supply and lead to the price recovery toward the $5 level, and possibly higher. The Haynesville shale, where the rig count has declined from the peak of over 180 rigs two years ago to approximately 27 currently, is often presented as the most compelling evidence supporting that argument.

The view has been advocated by several prominent industry CEOs, including Chesapeake's Aubrey McClendon and Ultra Petroleum's (UPL) Michael Woodford. During Ultra's 2Q earnings conference call on August 2, Michael Woodford re-iterated his macro perspective on natural gas: "Capital is being withdrawn from natural gas investment as seen in the rig count reduction and pressure pumping softness. Production lags capital expenditures and the decline in production is imminent. We see $4 gas in 2013 and $5 gas in 2014." With regard to Haynesville specifically, he commented: "We have a view that says: production supply is about to shrink pretty rapidly. I think there are some comments out yesterday, with some companies that announced and talked about the Haynesville, that they would see a 10% per quarter reduction in their production. I think it is plus or minus 40% for the year. If you apply that to the 6 Bcf per day of Haynesville production, it is 2.5 Bcf per day of annual rate reduction, so I think we are about to see a drop off in supply." Michael Woodford was referring to the earnings call remarks by QEP Resources (QEP) the night before.

Read full article

http://seekingalpha.com/article/786381

Views: 3480

▶ Reply to This

Replies to This Discussion

Permalink Reply by hogeyes on August 9, 2012 at 3:46

Goodrich has 2 horizontal wells operating on our Haynesville property and at least 2 more that I know of on neighboring sections.  Ours have been active since late 2010.

Permalink Reply by JAMES E. HIGGINS on August 9, 2012 at 11:12

SO WHEN WILL WE START SEEING 3.00/4.00 OR5.00 MCF JUST WONDERING

Permalink Reply by JAMES E. HIGGINS on August 9, 2012 at 11:16

DOES ANY KNOW WHAT IS GOING ON IN SAN AUGUSTINE COUNTY EXZAMPLE 21 EAST I HEARD THERE WERE GOING TO BE 2 MORE WELLS PUT UP  ON FAIRWAW FARMS WHICH IS ABOUGHT 4 MILES ON HWY 21EAST

Permalink Reply by adubu on August 9, 2012 at 12:59
James -- we got $3 gas now-- about the San Augustine wells would suggest you post that question on th"San Augustine group " site you will get better chance for a reply by members interesting in that area
1sk58mq3tyx9yPermalink Reply by 1sk58mq3tyx9y on August 10, 2012 at 2:51

Skip, thanks for this info. It doesn't seem to bode well for that Mississippi well in Jefferson county. There is a report on three counties just south of this well on the boarder between Mississippi and Louisiana where the well count is to be increased. The information I have received is that the well count is going up there to increase the drilling in the Tuscaloosa formation. It's strange that we talk about two different formations just a couple of counties apart. This is the report I got on this:

If you would like a copy of the full and final Batson Report, it can be
downloaded at one of these two links.

http://pikeinfo.com/DocumentView.aspx?DID=26
or
https://www.box.com/s/8e49063b245d6a84610e

 I have a friend on the Mississippi Council of Natural Resources that says that this increased activity in the lower counties should be of help to me with the investment I have in Jefferson county. That of coarse remainds to be seen.............Thanks again, Bill  

Permalink Reply by Skip Peel - Mineral Consultant on August 10, 2012 at 7:28

Bill, are you referring to the Berkley-Phillips #1?  Wow, we haven't discussed that well in a long time.  MNLU has turned out as I predicted years ago.  I'm sorry for those of you who had/have an interest in the well/leasehold.  I thought then that MNLU was hyping Haynesville Shale potential just because that was the hot investor buzz word at the time.  I haven't changed my mind. I suspect they have switched to TMS by now.  The well may have potential but MNLU is a house of cards.  I don't look for anything positive unless a bona fide operator takes over the well.  I hope you have better luck with the TMS play.

Permalink Reply by sfbrion on August 10, 2012 at 3:51

Skip,

Thanks for your post.   I follow the dry Marcellus and share your skepticism about overall production dropping off.   I see the Marcellus continuing to grow as fast as takeaway allows.  Reading all the comments below, it sounds like you think Haynesville drilling makes sense at a price over $4?  If I recall correctly Mike Watford indicated that he didn't see operators adding rigs to dry gas plays until gas is $5.  Do you agree that price has to go significantly higher than the ($4) economic threshold to deploy rigs?   Also what price is really the benchmark for investing?   Seems to me that the spot price is only an indicator and that drilling decisions are more likely to be driven by the strip price.  Could that be the disconnect between $4 and $5?  The forward curve is pretty flat with the three year strip still well below $4, so aren't we likely to see 6 months more of reduced drilling if economics have anything to do with it?

Permalink Reply by adubu on August 10, 2012 at 6:31

Skip and sfbrion---- link to active trading of Henry Hub Natural Gas future prices today  You do not see $4 until Dec 13 and $5 until January 2018 (Of course Future prices are based on fundamentals of present day economics and predicted future events similar to this article and discussion )http://www.cmegroup.com/trading/energy/natural-gas/natural-gas.html

Permalink Reply by Skip Peel - Mineral Consultant on August 10, 2012 at 6:53

You're welcome, sfb.  I don't pay much attention to spot prices only monthly settlement prices.  It's not that relevant to my day-to-day business.  And it's too tiring to get yanked around on a daily basis for penny swings and I don't have much faith in the ability of futures to accurately predict prices months, not to mention years, out.  Les B. is our go-to-guy on these types of questions and I trust his judgement.  He has been stating that some operators could still squeeze out a profit at these dismally low prices and, IMO, the article validates his opinion as far as ECA goes.

Permalink Reply by dbob on August 13, 2012 at 10:32

The claim is as follows (from press releases, not RRC) "

An independent contractor reported a wellhead production rate of 288 bpd oil and 454 MCF gas at3 AM August 3rd,
2012. This spot production rate of 364 BOE (Barrels of Oil Equivalent) per day compares with an average for the previous 24hrs of 309 BOE. The well has consistently produced high quality, light, sweet oil of an API gravity in excess of 40 degrees. The Company is currently designing an artificial lift system that it anticipates will further enhance the well’s production rate."

RSS

Support GoHaynesvilleShale.com

Top Content 

1 Looking Back At The Haynesville Shale - A Retrospective

Looking Back At The Haynesville Shale - A Retrospective
2 Pending Public Oil and Gas Hearings

Pending Public Oil and Gas Hearings
3 Arkansas Smackover Lithium Play

Arkansas Smackover Lithium Play
4 Aethon looks for Buyers of its Haynesville Assets

Aethon looks for Buyers of its Haynesville Assets
5 Notice Emails Are Back! Please review how they work.

Notice Emails Are Back! Please review how they work.
6 Comstock October Presentation

Comstock October Presentation
7 Haynesville Has 12.5 Years of Sub-$3 NatGas Inventory - Enverus

Haynesville Has 12.5 Years of Sub-$3 NatGas Inventory - Enverus

Blog Posts

The Lithium Connection to Shale Drilling

Shale drilling and lithium extraction are seemingly distinct activities, but there is a growing connection between the two as the world moves towards cleaner energy solutions. While shale drilling primarily targets…

Continue

Posted by Keith Mauck (Site Publisher) on November 20, 2024 at 12:40

Not a member? Get our email.

Groups



© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service