While the exploration and production industry has shifted away from dry gas development and towards oil and liquid plays, many operators are still active in the Haynesville Shale, and progressed on the development of this area during the third quarter of 2011.
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Extended Laterals
EnCana (NYSE:ECA) is developing the Haynesville Shale in both east Texas and northern Louisiana, and reported average daily production of 524 million cubic feet (Mcf) of natural gas equivalents per day from this play in the third quarter of 2011.

EnCana recently received approval to drill horizontal Haynesville Shale wells with extended lateral lengths. The company has drilled two horizontal wells in Texas, each with laterals of 7,500 feet and a pair of wells in Louisiana, with one having an 8,000 foot lateral section. (Find out how to invest and protect your investments in this slippery sector. For more, see Peak Oil: What To Do When The Wells Run Dry.)

EnCana expects to complete these wells in the fourth quarter of 2011 using between 30 and 35 fracturing stages per well.

EnCana believes that this drilling technique will boost estimated ultimate recoveries (EUR) from these wells to between 11 and 13 billion cubic feet (Bcf) per well. This is a large move up from the previous EUR of 8 Bcf per well.

Another company that achieved success with longer horizontals laterals is Newfield Exploration Company (NYSE:NFX), which is using the technique to develop the Bakken formation in North Dakota. The company refers to these as super extended laterals, and has seen more productive wells.

Cost Creep
QEP Resources (NYSE:QEP) is also active in the Haynesville Shale, and completed 13 operating wells during the third quarter of 2011. The company also participates on a non-operated basis and reported 14 wells put into sales during the most recent quarter.

QEP Resources experienced mixed results regarding the cost to drill and complete wells in the Haynesville Shale. The company reported that the average operated well cost was $9.1 million in 2011, down from $9.3 million in 2010.

On the non-operated side, QEP Resources is seeing an increase in costs relative to its budget, and cited this cost creep as one of the reasons that it added $50 million to its 2011 capital budget.

The Bottom Line
It's still fairly early in the third quarter earnings season with many operators active in the Haynesville Shale set to report during the first week of November. Two major operators to look for are Chesapeake Energy (NYSE:CHK) and Comstock Resources (NYSE:CRK).

Chesapeake Energy has 495,000 net acres under lease, and is the largest producer in the Haynesville Shale. The company reported average daily production in July 2011 of 1.09 Bcf of natural gas equivalents per day.

Comstock Resources has 79,000 net acres, and drilled 31 gross wells during the first six months of 2011. The company moved to pad drilling in the Haynesville Shale, and has seen lower well costs and higher estimated ultimate recoveries using this technique. (Drill down into financial statements to tap into the right companies and let returns flow. For more, see Unearth Profits In Oil Exploration And Production.)

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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