East Texas acreage hits 2.5 Bcf/d, IP rates at 12.2 MMcf/d compare favorably to Louisiana

Analysis: Majors drive Texas Haynesville natural gas production to record high

spglobal.com/plats  October 18, 2018

Output from play's East Texas acreage hits 2.5 Bcf/d in Oct

IP rates at 12.2 MMcf/d compare favorably to Louisiana

Denver — Gas production from the East Texas Haynesville could soon rival that from the more mature, proven fields of Louisiana, thanks to recent and growing investment there from some major oil and gas producers.

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Over the past two years, the Haynesville's renaissance has been confined, largely, to the acreage in Louisiana where smaller, independent producers have led the way.

Surging initial production rates, rising internal rates of return and falling breakeven gas prices have seen the basin's production rebound to an estimated 9.9 Bcf/d currently, from just 6.1 Bcf/d two years ago, according to data compiled by S&P Global Platts Analytics. The acreage in Louisiana has now proven itself to be competitive with even the Marcellus and the Utica. Yet, very few of the independent operators there have made their way west, across the state line.

In East Texas counties like Shelby, San Augustine and Nacogdoches, though, global majors ExxonMobil and BP have been rapidly building a presence, more than doubling their rig count there in the last year.

Recent data shows initial production rates in East Texas are still lagging behind those of Louisiana, suggesting that any major investment there could still be a gamble.

According to Platts Analytics, though, there's good reason to believe that the Haynesville's western frontier could soon become a major engine of production growth.

RECORD OUTPUT

In October, sample production from the East Texas portion of the Haynesville is at a record high, having climbed about 55%, just since January. According to a modeled estimate, production from the area is now averaging about 2.5 Bcf/d--equivalent to nearly one-quarter of the total output from the Greater Haynesville.

Recent production growth from the area comes partly from a build in rigs, but also on the back of improvements in drilling and well performance.

In October, the East Texas rig count has climbed to 21, up from just 12 rigs one-year prior.

A recent sampling of initial production rates shows a less-than linear rise in well productivity. As recently as fourth-quarter 2017, though, the average sample IP rate in East Texas hit a record high 12.2 MMcf/d, which compared favorably to an estimated IP rate at 14.7 MMcf/d in Louisiana.

While producers in East Texas still have some catching up to do, their well productivity has nearly doubled from an average IP rate at just 7.3 MMcf/d in 2016, Platts Analytics data shows.

INDEPENDENTS VS. MAJORS

The recent build in drilling activity in East Texas is perhaps most notable, because it's been led by global majors ExxonMobil and BP, which are currently operating 13 of the region's 20 or so rigs.

In contrast to the smaller independents, major oil companies rarely chase flashy drilling metrics, like IP rates and estimated ultimate recoveries or EUR, which, according to Platts Analytics, are more often used by independents as a means of capturing much needed investor dollars.

With many major oil companies typically favoring more paced, proven and reliable returns, it's notable that at least two of them have chosen to invest in East Texas, rather than Louisiana.

While future outcomes on drilling and well productivity are ultimately unknowable, Platts Analytics does expect East Texas Haynesville production to continue growing. According to the most recent forecast, output from the basin should handily rise to over 3 Bcf/d by late 2019.

-- J. Robinson, Taylor Cavey, newsdesk@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com

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I'm having a hard time believing that the CURRENT IP rate in the Louisiana Haynesville is 14.7 mmcf/d. With the current frac technology in use today, I'd guess the average current IP rates are at least 40% higher than 14.7mmcf/d, with many wells coming in at a rate in the high20's, low30's mmcf/d, which would be double the rate!  Of course, the article doesn't mention whether it is referring to initial IP, IP 30, or IP 180.

I agree but you guys should feel free to complain to Platts.  :-)

SB, average IP rate is a fairly meaningless piece of data. You made a very valid point with your last sentence.

There are few independents operating in the Shelby Extension because BP and XTO have consolidated a majority of the acreage down there plus it's still an expensive place to drill HA wells.

What's that old saying? "Everything's bigger in Texas."

I know of at least 1 well in SE Shelby county that has produced over 10 BCF and another one is rapidly approaching 10 BCF after just 38 months in production
Some outfit is procuring pipeline ROW running down the Louisiana side of the TX border from the Haynesville Shale to intersects with pipelines leading to St James, LA. For that much gas to be able to get to market in a timely fashion ought to be worth $1000/rod or more for ROW.

Skip, how can I determine what activity is going on in Bowie County, Texas?  How can I determine the exact location of wells in Bowie County, Texas, both active and inactive?  

Learn to perform basic searches on the Texas Railroad Commission database.

You can start with the RRC Group page but be aware that the RRC has made changes to the database since much of the information on the group page was posted.  Our go to GHS member for RRC database questions is jffree1.  You can friend Julie by clicking on jffree1 in blue in her discussion reply above.

https://gohaynesvilleshale.com/group/rrc_texas

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