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Petrohawk Energy's Haynesville Shale Update
Petrohawk Energy (NYSE:HK) spelled out its plan to develop the company's large position in the Haynesville Shale over the next few years, as it seeks to hold its acreage in the play. This program is considerable despite the weak price environment in natural gas.
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Overview
Petrohawk Energy has 368,000 net acres under lease in Louisiana and Texas that is prospective for the Haynesville Shale. The company is one of the dominant players in the Haynesville Shale with 110 gross wells producing approximately 500 million cubic feet equivalent per day.
Petrohawk Energy tried to reassure investors that its development program in the Haynesville Shale was robust enough over the next few years to hold its large acreage position. Some investors have been concerned about whether the company can drill enough wells to hold its acreage in this play
Weak gas prices have caused some operators to shift capital away from natural gas development, and towards oil and liquids, which have higher returns. Petrohawk Energy's development program in the Haynesville, however, is being partially driven by the need to hold acreage before leases expire.
Texas Haynesville
The company's 74,000 net acres in Texas is in a non-operated joint venture, and Petrohawk Energy is relying on its joint venture partner to drill enough to hold the acreage here.
Louisiana Haynesville
Petrohawk Energy is focused on the 294,000 net acres that it holds in Louisiana. This acreage is split into 1,568 sections, with 420 of these sections in areas that the company feels are not productive enough, or not de-risked enough to develop at this time.
Another 367 sections are already held by production through operated or non-operated wells, and 422 sections are non-operated but have been unitized by the company's partners.
This leaves 198 operated sections that have to be drilled by Petrohawk Energy to hold the leases. Eighty-four of these sections expire in 2012, and the company already has plans to drill 114 of the 198 sections in 2010 and 2011.
Restricted Rate Program
Petrohawk Energy has also been experimenting with intentionally restricting the production of wells in the Haynesville Shale, with the goal of having a better production profile for wells in the long term.
The company reported that wells on restricted production show a shallower decline curve, with first year declines moving from 80-85% down to 45-50%. Petrohawk Energy also believes that this practice will lead to a higher estimated ultimate recovery (EUR) per well in the long term.
However, the oldest wells in the restricted rate program are only nine months old, and the company needs additional evidence before the higher EUR is considered conclusive.
Comstock Resources (NYSE:CRK) is also experimenting with restricting production on wells. The company believes that this will lead to higher bottom hole pressures, keeping the fractures in the wells open longer and allowing the well to produce more later on.
Other operators active in the Haynesville Shale include EXCO Resources (NYSE:XCO), which just closed on the purchase of Common Resources, a private company with acreage in the Haynesville Shale.
GMX Resources (Nasdaq:GMXR) has 42,000 net acres prospective for the Haynesville and Bossier Shale, and is running three rigs in the play.
Bottom Line
Although natural gas prices are weak due to an oversupply of the commodity, Petrohawk Energy and other operators continue development programs in the Haynesville Shale. These companies are drilling to hold acreage that took years and millions of dollars to assemble. (For more stock analysis, see Big Energy Dividends.)
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IN PICTURES: 8 Financial Tips For Young Adults
Overview
Petrohawk Energy has 368,000 net acres under lease in Louisiana and Texas that is prospective for the Haynesville Shale. The company is one of the dominant players in the Haynesville Shale with 110 gross wells producing approximately 500 million cubic feet equivalent per day.
Petrohawk Energy tried to reassure investors that its development program in the Haynesville Shale was robust enough over the next few years to hold its large acreage position. Some investors have been concerned about whether the company can drill enough wells to hold its acreage in this play
Weak gas prices have caused some operators to shift capital away from natural gas development, and towards oil and liquids, which have higher returns. Petrohawk Energy's development program in the Haynesville, however, is being partially driven by the need to hold acreage before leases expire.
Texas Haynesville
The company's 74,000 net acres in Texas is in a non-operated joint venture, and Petrohawk Energy is relying on its joint venture partner to drill enough to hold the acreage here.
Louisiana Haynesville
Petrohawk Energy is focused on the 294,000 net acres that it holds in Louisiana. This acreage is split into 1,568 sections, with 420 of these sections in areas that the company feels are not productive enough, or not de-risked enough to develop at this time.
Another 367 sections are already held by production through operated or non-operated wells, and 422 sections are non-operated but have been unitized by the company's partners.
Restricted Rate Program
Petrohawk Energy has also been experimenting with intentionally restricting the production of wells in the Haynesville Shale, with the goal of having a better production profile for wells in the long term.
The company reported that wells on restricted production show a shallower decline curve, with first year declines moving from 80-85% down to 45-50%. Petrohawk Energy also believes that this practice will lead to a higher estimated ultimate recovery (EUR) per well in the long term.
However, the oldest wells in the restricted rate program are only nine months old, and the company needs additional evidence before the higher EUR is considered conclusive.
Comstock Resources (NYSE:CRK) is also experimenting with restricting production on wells. The company believes that this will lead to higher bottom hole pressures, keeping the fractures in the wells open longer and allowing the well to produce more later on.
Other operators active in the Haynesville Shale include EXCO Resources (NYSE:XCO), which just closed on the purchase of Common Resources, a private company with acreage in the Haynesville Shale.
GMX Resources (Nasdaq:GMXR) has 42,000 net acres prospective for the Haynesville and Bossier Shale, and is running three rigs in the play.
Bottom Line
Although natural gas prices are weak due to an oversupply of the commodity, Petrohawk Energy and other operators continue development programs in the Haynesville Shale. These companies are drilling to hold acreage that took years and millions of dollars to assemble. (For more stock analysis, see Big Energy Dividends.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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