SHREVEPORT (AP) — Some natural gas companies have decided to scale back drilling to ride out the economic storm.
But well results from the Haynesville Shale natural gas deposit have some of the major players there, like Petrohawk Energy Corp. and Chesapeake Energy, investing more money in the play.
“We’ve scaled back our overall budget, but not in the Haynesville,” said Joan Dunlap, vice president of investor relations for Petrohawk.
Of Petrohawk’s approximately $1 billion budget for 2009, between $700 million and $800 million is dedicated to the Haynesville Shale natural gas deposit.
There’s a good reason for that investment.
According to the latest data from the Louisiana Department of Natural Resources, the top producing well for the month of December belongs to Petrohawk. The well, in Red River Parish, produced about 713.4 million cubic feet of natural gas that month. That translates to about 23 million cubic feet of natural gas per day.
It’s not the only well producing extraordinary numbers.
There are 266 wells permitted to drill in the Haynesville Shale. Forty-four of them are active and producing, according to data from Natural Resources.
Of those 44, eight produced from 100 million to more than 700 million cubic feet of natural gas in December.
Ray Lasseigne, president of TMR Exploration in Bossier City, said these are phenomenal numbers, especially compared to conventional, vertical wells drilled in other natural gas formations, like the Elm Grove and Caspiana fields.
A good well in those fields could produce 2 million to 3 million cubic feet of natural gas a day, Lasseigne said.
“Obviously, the shale wells are up to 10 times better than the typical wells drilled over the last five or six years,” he said. “These are phenomenal wells. Even the major players are pleasantly surprised by the quality of these wells.”
Even with the current low price of natural gas, which was trading for about $3.85 per mcf recently, companies still are able to turn a profit.
Chesapeake, which has 25 of the 44 active and producing wells in the Haynesville Shale, announced in its annual earnings report it will curtail drilling activity across the board by 7 percent this year and maybe another 10 percent reduction if the market continues to worsen.
But, like Petrohawk, Chesapeake is not cutting back in the Haynesville Shale.
Kevin McCotter, Chesapeake’s director of corporate development for Louisiana, said the company has reduced its rig count nationwide but still intends to have about 30 rigs operating in the Haynesville Shale by year’s end.
“We have not altered our plans by one bit. We continue to be optimistic on the results we are finding in the Haynesville and about the long-term value.”
Dunlap said the Haynesville Shale wells pay out quickly, which allows them to reinvest in the shale two or three times a year. That’s unheard of in other, more conventional natural gas plays.
However, reinvestment will become more difficult as the demand for natural gas continues to decline.
The industrial sector is the primary market for natural gas. Large manufacturing facilities, like steel mills and automobile plants, and electric plants are the primary users of natural gas.
As long as there is less demand for the products those facilities produce, there will continue to be a diminished demand for natural gas, Dunlap said. “The crux of the natural gas decline has been the lack of demand. If those facilities aren’t working as much, they aren’t buying as much.”
Lasseigne said the only way for natural gas prices to go up is for the U.S. economy to improve significantly. “Right now, there’s an oversupply of gas. With the Haynesville adding gas at such high rates, there’s ample to go around. I don’t look for an increase in prices in the near-term.”
