Natural Gas: Playing the Haynesville Shale

The Wall Street Journal explicated the Haynesville shale play offering various views on the three main ways to participate. Chesapeake (CHK) is the diversified approach, Petrohawk (HK) is the concentrated way, and Goodrich (GDP) seems to be the small cap approach. Haynesville is a southeastern shale deposit in Arkansas, Louisiana, and Texas.

The Journal article states:

Chesapeake Energy has snapped up more than 300,000 acres of potential mineral reserves and is bargaining for 200,000 more in the Haynesville area. The company, which has vast resources to unearth gas deposits, accelerated a real-estate bidding war in April, when it declared that Haynesville “could potentially have a larger impact” than any of its previous energy investments...

The race to acquire Haynesville acreage started fewer than two years ago. Petrohawk was already drilling a gas deposit known as Cotton Valley, a separate deposit that runs roughly 3,000 feet above parts of Haynesville’s deposits, when it became aware of Haynesville in 2006. Chesapeake later raised expectations with claims that Haynesville holds large quantities of natural gas.

The real-estate frenzy, largely inspired by Chesapeake’s initial claims of vast resources, has created a short-term windfall for Goodrich, which has acquired most of its Haynesville land at an average price of $350 per acre. New territory in Haynesville is selling for more than $4,000 an acre, according to a senior official at Goodrich. The rush to develop Haynesville is also being fueled by natural-gas-futures prices that recently reached $11.17. All three energy producers are in a hurry to begin drilling while natural-gas prices are high.

It is an unconventional gas field that seems typical of a number of others, such as the Barnett Shale, that are lifting U.S. natural gas production and offering a vision of resource plenty. I suspect that vision is accurate in the short term but likely to disappoint beyond a few years out. Moreover, it may tempt electric utilities to add gas fired capacity, a decision they may come to regret if gas price continue their recent rapid climb.

Comments

[User 163362]

How chesapeake (CHK) factors into my investment plan...

20smoney.com/2008/05/1.../

[Ozarker]

The way I understand it is that there are Shale deposits all over with tremendous untapped natural gas reserves, which are now doable because of new horizontal drilling techniques and the higher price of gas. This is not short term. Also, nothing burns as clean as natural gas for power generation and the ultimate scenario is to use compressed natural gas for vehicular fuel because it is abundant, clean burning, economical and DOES NOT HAVE TO BE IMPORTED.

[Mmarrkk]

Caution: 7-15 wells have been drilled; very few tested properly and the resource estimates are already run up to 7-10 TCF. Irrational exuberance????

[aflitzy]

could be good potential in NG as the spread between NG and oil favors potential in NG

[User 22706]

Another way to approach the potential resources of these plays is through investment in those that provide the rigs. Helmerich & Payne's FlexRigs are highly thought of throughout the industry. They are state-of-the-art when it comes to horizontal drilling.

[taylormade]

NG, based on early reports from new unconventional shale plays such as Marcellus, Huron and Haynesville, may be a mid to long term partial solution to the U.S. oil (energy) dilemma. The dilemma, oil is expensive, dirty and much of it comes from nations that can only be considered less than a friendly neighbor.

Pickens proposes, and puts his money where his mouth is, wind energy be increased to produce electricity. Then some current NG used for electrical generation and of course the new NG shale plays can be used to displace some reliance on oil products for transportation including cars. His company is CLNE and they are building CNG (compressed Natural Gas) filling stations eventually across the entire US.

I have read many articles about these new shale plays and am somewhat astonished when XCO is not mentioned associated with all three, Marcellus, Huron and Haynesville. For the size of the company, they have oversized positions in all three shale plays mentioned here and they have some infrastructure and most of their acreage is held by current production from shallower wells.

[paultaut]

British Petroleum has some 160,000 gas stations all by its lonesome. And you can drive for miles without seeing another depending on the State.

Now, T Boone is doing what? across the nation?

Does he have access to TRILLIONS? This is a niche play. THERE IS NO INFRASTRUCTURE!!!!!

His wind farm alone is expected to cost $10 Billion currently and not be completed until 2014...expect final costs to double,triple....

Pipe dreams.

[paultaut]

Speaking of pipes, where are they going to be produced, by whom, using what material and where are they going to be imported from?

Instead of importing oil, we will be importing infrastructure for a long time.

[fran]

PAULTAUT--

the infrastructure is provided by each NG utility connected to houses/businesses. if you can grill steak, dry clothes, heat your empoyees your in.

[paultaut]

Which means that the prices for the nat. gas used to power those meantioned will rise dramatically.
But that is not infrastructure, that is merely a source for those nearby.

How will you access that gas? Punch a hole in the pipeline, like in Nigeria? Create a fleet of LNG trucks to drive it from the nearby utility to your newly created airtight special storage tanks?

What you are talking about is already in place and has been found wanting. The Chinese have built 5 million+ cities based on different fuel sources for vehicles, Hydrogen, Coal Gasification, Nat. gas, etc. but have not yet found one to base other cities on.

I have no idea how the technology works that allows what is a gaseous material to be burned fast enough to power a vehicle and yet be replenished continuously without blowing everything up. Not Rhethorical....I don't have a clue?

[ellwodo]

What about XCO? Percentage wise Haynesville is likely to have a bigger effect on it than on CHK. It has over 100,000 net acres nd just announced a $100 milion capex increase for the Haynesville play.

[GoldenTornado]

The oil companies must be certain there is a huge amount of NG in the Haynesville Shale as they are paying up to $20,000 per acre for leases.
A couple of months ago it was $200 to $400 per acre. Paying over $10,000,000.00 to lease each section they would have to be certain.

[keeter]

Interesting things on the ground
gohaynesvilleshale.com

[wishnbuy]

Please do not sign any lease drawn by the oil and gas companies. They are designed to be in their favor. Go to an oil and gas attorney and have your own lease drawn for both to sign. Go as a neighborhood group and it may be much cheaper.

There are many things to consider such as noice and light abaitment;what it will do to your roads; protect your underground water source; protect other mineral right other than gas or oil and many others.

Don't forget that any money that they pay you up front, you will owe the IRS about a thrid of it because it is taxable.

[keeter]

gohaynesvilleshale.com to see thenotes from Chespeake's conference call

[trader tim]

Great Article Jim....this shale play is going to be huge....another great site is
www.oilshalegas.com/ha...

And for a list of companies drilling at Haynesville

www.oilshalegas.com/ha...

Keep up the good work!