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The Haynesville Shale In 2011
The Haynesville Shale will continue to attract capital from the exploration and production industry in 2011 despite the current antipathy towards natural gas. This activity will gradually decline during the year as operators wind down development needed to hold acreage in this shale play.
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The Players
Petrohawk Energy (NYSE:HK) is one of the largest acreage holders and most active exploration and production companies in the Haynesville Shale, with 368,000 net acres under lease. The company estimates that by the end of 2011, it will have converted most of its acreage from term to held by production.
This is reflected in Petrohawk Energy's rig count in the Haynesville Shale over the next year. The company averaged 15 rigs in 2010, and ended the year with 12 rigs operating. Petrohawk Energy will cut its operations significantly as the year progresses, and will operate only seven rigs during the second half of 2011.
Chesapeake Energy (NYSE:CHK) is also a large acreage holder in the Haynesville Shale, with 525,000 net acres under lease. Chesapeake Energy hasn't released its capital budget for 2011 yet, but the company has adopted a goal of increasing its production of oil and liquids over the next five years.
Chesapeake Energy hopes to reach production of 250,000 barrels of oil and natural gas liquids per day by 2015, and this goal implies a reduction in activity in dry natural gas plays like the Haynesville Shale over that time frame.
Joint Ventures
Another reason for continued drilling in the Haynesville Shale in 2011 despite weak natural gas prices and lower returns than other basins is the existence of joint ventures that some independent exploration and production companies have entered into.
EXCO Resources (NYSE:XCO) has a joint venture agreement in the Haynesville Shale with BG Group (NYSE:BG). The company has allocated $757 million in capital in 2011 for the acreage within the joint venture, with most of the funds for drilling and completion. EXCO Resources will participate in 233 gross wells in the Haynesville Shale in 2011, both operated and non operated. The company believes that this level of development will hold all of the company's leases by the end of 2011.
One positive side effect of the gradual decline in development in the Haynesville Shale during the year will be more available oil services capacity. This may ease cost pressures that many operators have experienced here in 2010.
Bottom Line
The Haynesville Shale is ground zero for the frantic effort by the exploration and production industry to hold acreage and protect billions in investments made over the last few years. These efforts will continue in 2011 but will become less harried as the year progresses. (This exciting sector demands a lot from its advisors. Are you up for it? Check out Acquire A Career In Mergers.)
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IN PICTURES: 5 Tips To Reading The Balance Sheet
The Players
Petrohawk Energy (NYSE:HK) is one of the largest acreage holders and most active exploration and production companies in the Haynesville Shale, with 368,000 net acres under lease. The company estimates that by the end of 2011, it will have converted most of its acreage from term to held by production.
This is reflected in Petrohawk Energy's rig count in the Haynesville Shale over the next year. The company averaged 15 rigs in 2010, and ended the year with 12 rigs operating. Petrohawk Energy will cut its operations significantly as the year progresses, and will operate only seven rigs during the second half of 2011.
Chesapeake Energy (NYSE:CHK) is also a large acreage holder in the Haynesville Shale, with 525,000 net acres under lease. Chesapeake Energy hasn't released its capital budget for 2011 yet, but the company has adopted a goal of increasing its production of oil and liquids over the next five years.
Joint Ventures
Another reason for continued drilling in the Haynesville Shale in 2011 despite weak natural gas prices and lower returns than other basins is the existence of joint ventures that some independent exploration and production companies have entered into.
EXCO Resources (NYSE:XCO) has a joint venture agreement in the Haynesville Shale with BG Group (NYSE:BG). The company has allocated $757 million in capital in 2011 for the acreage within the joint venture, with most of the funds for drilling and completion. EXCO Resources will participate in 233 gross wells in the Haynesville Shale in 2011, both operated and non operated. The company believes that this level of development will hold all of the company's leases by the end of 2011.
One positive side effect of the gradual decline in development in the Haynesville Shale during the year will be more available oil services capacity. This may ease cost pressures that many operators have experienced here in 2010.
Bottom Line
The Haynesville Shale is ground zero for the frantic effort by the exploration and production industry to hold acreage and protect billions in investments made over the last few years. These efforts will continue in 2011 but will become less harried as the year progresses. (This exciting sector demands a lot from its advisors. Are you up for it? Check out Acquire A Career In Mergers.)
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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