Hidalgo Exploration & Production Co.,Inc

Haynesville “Shale” Play–Is There a Sting in the Buzz???

With Cheasapeake’s announcement of its belief that ” the Haynesville Shale play could potentially have a larger impact on the company than any other play in which it has participated to date” the industry has -ahem-taken notice. Petrohawk announced that it had/was acquiring an additional 60,000 acres in the play, including some in and around its Elm Grove field production. Lease hounds have been baying at the petromoon while trying to beg, borrow, toplease, JV into and otherwise acquire a respectable acreage position in the play.

Not being part of Chesapeake’s geoscience team, and not having sat their rigs as they’ve made hole through the Haynesville section good, hard intelligence on this play is pretty sparse. Chesapeakes’ SRLT 29 #2

API # 17-017-34257 was completed in the Haynesville with an IP of 2647 MCF /D .Lots of people are thinking that this is a shale play like the Barnett. If it is, then there’s a TON of upper Jurassic shale throughout East Texas all the way over to the Mississippi Interior salt basin that may be good. Boudreaux gets to upgrade the pirogue, Shreveport’s riverboat casinos party hardy with new petro dollars, and the good times roulez.

If, however, however, there is a Terryville sand -type fraction in the Haynesville section that’s the target, then maybe acreage selection has to be a bit more selective and rely on hard data like seismic and good ol’ isopachs and sub -surface mapping.

At measured depths of 14000′ plus these wells ain’t cheap so let’s hope the reservoir supports the buzz…..check out the general permit map for permits last 700 days > 10000′ for an overview of activity

Haynesville-shale player Petrohawk Energy Corp. is “well beyond” its last announced position of 150,000 acres in the play and overall leasing in the play is 80% complete, according to president and chief executive Floyd Wilson, but the emerging Bossier formation potential could expand the play even further, he predicts.

 

Wilson

spoke at Oil and Gas Investor’s Energy Capital Investment Symposium in

Houston

on Wednesday.

“We’ll buy all the quality land that we can,” he said. “You don’t get an opportunity like this very often. We’re right in the middle of it, we already have a lot of land and we want more.”

Already the company is in a position to drill for decades, he said, and not “ratty” locations where success is hit or miss. “These are places where we can drill thousands of wells with no dry holes.” Petrohawk has three rigs running at present and plans to have 10 by year-end.

The company is estimating reserves of 5 billion cubic feet per well at a well cost of $6- to $7 million with 50 billion cubic feet recoverable per section. With production tests on eight wells,

Wilson

said the recoverables “calculate better per section than the Barnett does.”

Since April lease costs have escalated to $10,000 to $15,000 per acre for a typical three-year, 75% net-revenue-interest lease and into the $20,000s for deeper rights extending beyond the three-year time frame.

And do the economics of the play justify such lease costs? “For sure,” he said without pause. “We haven’t seen anything yet to dampen our enthusiasm for the play. Hence our spending activities over the last month or two increasing to hundreds of millions of dollars per week.”

Growing data on the Bossier formation, however, which lies just above the Haynesville shale, is adding a new facet to the play, he said, possibly expanding the size of the play south in Louisiana and further west into East Texas beyond the boundaries of the Haynesville. The Bossier comes into play where the Haynesville gets thin and could be just as good as the Haynesville.

Although some reports have interchanged the terms for the Haynesville and Bossier trends as synonymous,

Wilson

makes a distinction that they are overlapping but separate trends.

“The Bossier is just picking up speed and may double the size of the overall area,”

Wilson

said. “The Bossier seems to be very real, all the way over to

Rusk County

” in

East Texas

. “It’s going to go quite a ways over there.”

He said Petrohawk will continue leasing as far west of the northern

Louisiana

epicenter of the play as research indicates. “Our focus has been the Haynesville and it still is, but we have certainly shifted gears over the past two months to try to pick up leaseholds in the Bossier play as well.”

Some

East Texas

lease holders targeting the James lime and

Travis Peak

trends are “looking pretty prospective now for Bossier,” he adds.

 

Wilson

said the play is breaking so fast that it will likely cause bottlenecks in rigs and takeaway capacity in a year or so. He expects 100 rigs running by mid 2009, up from five at the beginning of 2008, and horizontal rigs with top drives are becoming scarce.

“You’re looking at a huge traffic jam of people hauling rigs up into this area over the next couple of years.”

Getting the anticipated gas out of the area and into an interstate pipeline is going to be an issue as well. If you’ve got a lot of wells coming in at 5- to 15 million cubic feet a day, you could get this field up to a Bcf (billion cubic feet ) a day rather quickly. If it gets to a Bcf, we don’t believe there’s that much capacity there.”

Another pipeline will need to be built to handle the capacity, he said, as the existing infrastructure is currently close to capacity transporting Barnett shale production through the region.