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Permalink Reply by Steverino86 on December 18, 2014 at 6:43

That's very interesting.  I figured that we wouldn't see any more drilling for gas until we had a sustained $5mcf or so. Isn't the Haynesville about $3.75 to break even?

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Permalink Reply by Steve P on December 18, 2014 at 9:35

fascinating.  For years now, the E&P companies have been running from NG into the oil or liquids prospects, but the price of crude, driven by global eco-politics, is now the risky investment.  So, NG, while lacking glamour, is the steady commodity that Comstock is returning to.

Less flash, but steady cash, shall we say.

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Permalink Reply by Skip Peel - Mineral Consultant on December 18, 2014 at 10:12

Core and Tier One Haynesville acreage has a cost to produce an mcf a good bit lower than $3.75.  Leases are HBP, infrastructure is in place and paid for and pad drilling and Cross Unit Laterals make  for a less risky development investment.  A decline in demand for field services related to oil will help all NG operators reduce their cost. Keep in mind that it will take some time for new drilling programs to get underway and will not result in new completions until later in 2015.  The industry opinion on future pricing is so so but stable in 2015 but thought to be improving in 2016 when much of the new gas production will be sold.

The wild card in the equation for NG pricing over the next few years is, how much gas from lower cost plays will be available to end users in the same market served by Haynesville/Bossier operators?  Marcellus NG could likely be sold at a moderate profit between $2 and $2.50/mcf.

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Permalink Reply by tc on December 18, 2014 at 10:30

Another wild card for Marcellus shale is that the new Democrat PA governor ran on a promise to make energy companies pay more taxes.  Now that it is coming out that the old Republican governor left the state with a $2B budget gap for next year, the cry to tax the energy companies will be even louder.  Depending on the tax increase, the economics of PA Marcellus NG could change. 

This is from a PA budget org

Pennsylvania would benefit from switching from its current impact fee to a severance tax. Depending on the estimate, the severance tax could raise two to four times as much revenue as we expect from the impact fee, with this difference growing over time.

Whether the revenue gain from switching to a severance tax is $400 million, $600 million, or more, this is exactly the type of recurring revenue needed to help restore harmful cuts to our schools, help bridge an estimated $2 billion funding gap in 2015-16, and help close the state’s ongoing structural deficit where revenues grow more slowly than spending.

 

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Permalink Reply by Skip Peel - Mineral Consultant on December 18, 2014 at 10:39

It's unlikely that a severance tax would change the F&D costs enough to make Marcellus gas more than Haynesville even with higher transportation costs.  IMO PA should have a severance tax on NG just as Louisiana does.

http://dnr.louisiana.gov/assets/TAD/data/severance/la_severance_tax...

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Permalink Reply by tc on December 18, 2014 at 11:43

Another question is that many other NG areas, like the Marcellus, are profitable because they are "wet" gas, but with the 50% decrease in oil prices, what has happened to NGL prices?

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Permalink Reply by Skip Peel - Mineral Consultant on December 18, 2014 at 11:56

NGL prices have dropped but not to the extent that crude has declined. 

December 9 Mont Belvieu Hub Prices
Week	Eth	Pro	Norm	Iso	Pen+	NGL Bbl
Dec 9	15.62	57.76	78.40	79.22	130.58	$24.37
Dec 2	19.52	69.30	92.10	93.07	141.20	$28.16
Nov 25	19.70	74.65	99.55	101.53	152.20	$30.18
Nov 18	21.94	80.74	107.52	110.50	150.16	$31.77

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Permalink Reply by tc on December 18, 2014 at 12:20

Thanks for the info.

Wall Street didn't like Comstock's decision to move to NG as its stock was down 13%, while most energy companies were up.  I think that Comstock's decision to move away from the Eagle Ford, reminded investors that the Eagle Ford is not a uniform play and just like the Haynesville there are different tiers of acreage.

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Permalink Reply by Steve P on January 8, 2015 at 10:36

Any of you know when and what area Comstock plans on resuming drilling?

In the past, there was a monthly update of drilling rig locations for the HS on this site.  Is that still maintained?  I couldn't locate it.

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Permalink Reply by Bobi Carr ("parker") on January 8, 2015 at 11:27

Nope.  I didn't.  But it's taken care of now.  Thanks

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Permalink Reply by Skip Peel - Mineral Consultant on January 8, 2015 at 11:08

I don't know when but I do know where.  Steve, there hasn't been an active drilling location discussion group since Les B. stopped posting in 2012.  And I'm far too busy to post a comprehensive listing so just ask for specifics from time to time and I'll try to help.

Comstock has one rig running (H&P #197) currently drilling the Pyle 6-7HC #1 Alt.  Here is the list of their current permits including the Pyle.  They are all in DeSoto Parish in the following fields:  Spider, Logansport and Belle Bower.

248504	HA RA SUU;PROVOST ETAL 30 HZ	001	01					8575	01-OCT-14	030-12N-14W
248505	HA RA SUAA;WR BILLINGSLEY 2 HZ	001	01					8575	01-OCT-14	002-11N-14W
248506	HA RA SUZ;HODGES LND TBR 32 HZ	001	01					8575	01-OCT-14	032-12N-14W
248507	HA RA SUT;QUINN PINE TMB 25 HZ	001	01					8575	01-OCT-14	025-12N-15W
248508	HA RA SULL;E C MCCOY 34 HZ	001	01					6156	01-OCT-14	034-12N-15W
248509	HA RA SUNN;WILLIAM J TODD 2 HZ	001	01					6156	01-OCT-14	002-11N-15W
248510	HA RA SUOO;MCM HOLLOWAY 1 HZ	001	01					6156	01-OCT-14	001-11N-15W
248549	HA RA SUMM;MILTON HARRIS 35 HZ	001	01					6156	07-OCT-14	035-12N-15W
248827	HA RA SUH;PYLE 6-7 HC	001-ALT	01					1408	22-DEC-14	031-13N-16W

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Permalink Reply by Steve P on January 8, 2015 at 11:55

thanks, as always, Skip.  all of the other permits are for a block of adjacent sections Comstock obtained from BP.  there are some pretty decent HA wells surrounding this block. I don't think that these sections are in the Tier 1 or Core area of the HA, but it is unusual that neither BP nor Comstock has drilled any of those sections.  All are HBP with more shallow wells, mostly Hosston.   At 1/8 royalty, of course.

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