Replies to This Discussion

Permalink Reply by Jesse Joyner on Friday

Sounds like there's plenty of gas left in the tank to me. Thanks for posting this, Skip.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on Friday

I think I need to do a little sleuthing and see if I can confirm that statement about 4,000 Tier One and Two wells having been drilled.  Just the Louisiana side of the fairway I think has more.  The Tier Two locations are likely ones on the edge of the fairway and are drilled because that's all the operator has access to with Trinity in north Caddo being a good example.  If Tier Two is all ya got and it is economic, you drill it.

My larger concern is for long term demand and the price.  Twenty-five years is a long, long time in this business and much can change.  The US and the world will be quite different in another two and a half decades.  May we all still be around to discuss it.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on Sunday

What’s left in the tank?
▪️ Only ~4,000 Tier-1 and Tier-2 wells have been drilled to date

The sleuthing is done.  By my count, and I'll use the approximate symbol just as Novi Labs did, the total to dateis 5,337.  I'm hand counting the wells drilled in the eight NW LA parishes, not any Haynesville wells in E T X.  Mr. Gorzon does not specify if he is counting both states.  If it's just Louisiana, he is off by about 1,337 wells.  My count may not be exactly right because it was counted over a couple of days and included any HA well drilled.  A small number of those are not producing but they constitute a well slot that is not available to be drilled in the future.  I am taking for granted that the wells drilled to date are Tier 1 and Tier 2.  If any are Tier 3 wells, they are few in number and likely test wells on the periphery of the economic fairway.

• ▶ Reply

Permalink Reply by Ryan Howrish 20 hours ago

I think you've hit on an important point - how do you define the tiers?  I suspect Novi has a different definition than you, and that is likely a big reason your tier counts differ from theirs.

Out of curiosity, what criteria did you use to differentiate between Tier 1, Tier 2, and Tier 3?

To add a layer of complexity, if you drill a single Tier 1 well in a section and then come back and offset that well at whatever you determine optimal inter-well spacing is for you, will the next well that is being developed in a partially depleted Section automatically be deemed to be a Tier 1 well?

Personally, I disregard all the large data company reports on remaining inventory by Tier and discard them.  Every company uses different metrics and has different evaluation criteria, so a data aggregator using public data will very seldom match an operator's inventory.  At a macro scale, the data aggregator's numbers may provide some valuable insights, but at a more micro level, I find them pretty useless. 

When I worked at an operating company several years ago, I tried to get one of the biggest name data companies to sit in a room with me and go through a hundred or so wells that we had a lot of granular data on to compare with their models, and they wouldn't. They provide a valuable service, but I think its more limited in scope than they think.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant 19 hours ago

I agree that Novi is one of those data companies that often appears to have opinions that differ from mine.  The only means I have to help give an idea to what is Tier One, Two or Three are some Haynesville contour maps.  The Petrohawk PhiGF-H & EUR map is one of the early ones that seems to have been proven largely accurate over the years.  When it was first published the contour lines for 8 to 10 Bcf were the ones I used for Tier One but over time and the evolution of well technology that has expanded to what was the 6 Bcf contour many years ago.  Petrohawk also published a contour map for the Mid-Bossier.

• ▶ Reply

Permalink Reply by Ryan Howrish 1 hour ago

Early in the life of a play, when there is little production data, petrophysical maps like PhiH are used as screening tools to try and identify "sweet spots".  They generally do not correlate directly with production results, but they are one indicator. Once the play has significant production, I am less inclined to use petrophysical maps and would lean towards production results.

I don't know the vintage of the Petrohawk maps you are using, but I suspect they are relatively early in the play.  EUR maps are challenging because every company, engineer, and geologist has their own implicit biases that influence the results.

In my opinion, there are a couple of different aspects to tiering:

1) Productivity Tiering - a combination of well deliverability and pressure.  Both influence early-time production and long-term recoverable reserves.  Ignores capital and operating costs.  I would tend to use cumulative values after at least 24 months of production as an indicator of productivity without having access to flowing pressure or reservoir pressure data.  Most wells in the basin have a flowing surface pressure equal to the gathering system pressure after about 24 months.  First-year data can be skewed depending on how aggressive or conservative a particular company is with its choke/pressure drawdown strategy.

2) Economic Tiering - A combination of investment costs, operating costs, and production.  A deep, high-pressure sour gas well may have a higher EUR than a shallower, lower-pressure sweet gas well; however, it costs more to develop and operate, and it could very likely have worse economics despite having a higher EUR and PhiH value.

I know from experience in the Haynesville that treating sour gas wells on the pad location is very expensive. To my knowledge, there is no central sour processing infrastructure that could significantly reduce the unit operating costs for sour wells.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant 58 minutes ago

The Petrohawk maps were published early in the play.  Likely 2009 if memory serves.  This may have been a reaction to the fact that Petrohawk was reported to have missed the Haynesville Shale potential until it was announced by Chesapeake.  One of our early geologist members stated that after the announcement Petrohawk did a deep dive into well control and said "we have it too" when referring to their existing Cotton Valley leasehold footprint.

The Petrohawk maps have proven largely accurate over time.  They predicted the Logansport area low porosity area where Chesapeake drilled a significant number of sub economic wells and few HA wells have been drilled since.  Early on before the beginning of HC wells, the maps were proven accurate to a significant extent in the location of faults.  I got my hands on a couple of operator field maps that confirmed the locations and throws of faults depicted in the Petrohawk maps.  

Since publicly available maps and other detailed data are all that those outside the industry have access to, those of us not in the industry take what we can get and do the best we can with it.  SONRIS has been a huge help and advantage for Louisiana mineral owners.

• ▶ Reply