SHREVEPORT, Louisiana — Texas-based Comstock Resources weeks ago offered a sliver of hope the Haynesville Shale may be getting renewed attention from the industry.
The independent energy company announced plans to suspend its oil-directed drilling activity in shale plays in Texas and Mississippi and move two rigs to Northeast Louisiana where it would start up drilling for natural gas in the Haynesville Shale. Comstock expects to spend $161 million drilling 14 horizontal wells in the Haynesville and overlaying Bossier Shale, according to a news release issued Dec. 18.
The first well was spudded last week and the second rig is expected to move into DeSoto Parish at month's end or in early February. Even though natural gas prices have dropped slightly since the announcement — the price was $3.14 mmBtu last week — Comstock officials believe if the price hovers around $3 the company "will still see some pretty decent returns," said Gary Guyton in the company's investor relations division.
Comstock is the first to publicly say it's turning its attention back to natural gas as the oil market continues its struggles with bottoming prices. But others are "definitely talking about it," said Ragan Dickens, Louisiana Oil and Gas Association's North Louisiana communications director. "We're hearing reports that natural gas in general and the Haynesville Shale specifically is getting more appealing by the day."
Shale exploration exploded in early 2008 and the Haynesville was touted as the highest-producing natural gas play in the nation. It rocketed until about 2012, when prices began dipping, causing producers to turn their horizontal extraction efforts to more lucrative oil-rich plays. Rigs pulled out of the Haynesville by the droves, leaving only a handful of companies continuing to hammer away at the trapped natural resource.
Other oil and gas producers may be giving the shale another glance now to offset oil prices that have taken their turn at racing downward. While putting a smile on motorists' faces with gasoline hovering at or below $2 a gallon, the plunging crude oil prices already are causing companies to hit pause on expanded or new exploration in oil-heavy shales such as the Tuscaloosa Marine that spans across South Louisiana and into Mississippi and the Eagle Ford in Texas.
Another fallout from the oil price slide is the thousands of rig hands who have been losing their jobs in recent weeks. Oil companies also are slicing the operational budgets, and all of that combines to send a ripple through the economy hitting pocketbooks of mom and pop and the coffers of government bodies.
Companies such as Comstock Resources, that were not as well-positioned in oil plays such as the larger EOG Resources in the core of the Eagle Ford Shale, may be the ones looking to move to the Haynesville Shale, said Chris Robertson, research analyst for Wood Mackenzie, a Houston-based energy research firm.
Natural gas prices have been stagnant for some time but operators in the Haynesville Shale have been working with it. With the Haynesville, they know what it costs to drill so it's easier to work out the economics of their operations in conjunction with what they want to produce, said Patrick Courreges, Department of Natural Resources communications director.
"I don't think we'll see a huge uptick but we probably will see some folks say 'Let's go ahead and do the gas because we know what we can get out of it,'" Courreges said. "It's like a bank account, it may come and go but people know where it is and how to get it out. There won't be the fever pitch in drilling but it's not going to fade."
If there is decreased activity in shale oil plays, whether from taking down rigs or having less capital to spend, then there could be a drop in the supply of natural gas as well, which might put upward pressure on prices, Robertson said.
"More marginal areas will shut down but that leaves more productive wells in productive areas. . It all depends on how long oil prices stay low," he said.
Guyton noted even Chesapeake Energy bumped up its rig count last year in the Haynesville Shale. Comstock was planning to move a rig back there, too, even when oil prices were above $100 a barrel, he said.
"Because when you stand back from the pine bark, the Haynesville hasn't been hit with a new vintage completion. The last signification drilling was in 2010 and 2011. The completion techniques have improved and changed since then. It's not just the gas price but also newer techniques that should increase the returns," Guyton said.
Haynesville wells are not cheap. Guyton estimates Comstock's costs at $11 million or so. But longer lateral — now 7,500 feet as opposed to the 5,000 feet laterals prominent in 2010-11 — increase efficiency.
"It's stuff we've been doing in the Eagle Ford in Texas and we're going to bring that technology to the gas side," Guyton said.
Increased efficiency in operations is what Jason Pigott, Chesapeake Energy's senior vice president of operations in the southern division, promoted in a May report to investors. Pigott said the Haynesville production had turned from a "declining asset to a growth asset."
"We are not hampered by some of the constraints in the Northeast market. So it is a great gas lever for us, a great value lever for us. We are also well-positioned for many of these LNG projects. They are in various stages of development. We have got a team that is dedicated and focused on looking at value-adding opportunities there," Pigott said.
But even LNG has taken a hit of late from the shaky global oil market with the announcement last week that Excelerate Energy was putting on hold its floating export plant. The Houston company said it had not signed up enough international buyers to satisfy its investment, according to a Reuters report dated Dec. 30.
"In a falling oil price environment it's going to be harder to export to make up for the huge capital investment up front," Robertson said.
Still, LNG export is considered the next game changer for natural gas plays. About a dozen other multi-billion dollar liquefaction projects are in various stages of permitting or construction, with Cheniere's Sabine Pass LNG receiving terminal in Cameron Parish nearing completion of its first phase.
"The bulk will be coming on in the three- to four-year time frame which could support the demand," said Reagan "R.T." Dukes, senior analyst with Wood Mackenzie.
Information from: The Times, http://www.shreveporttimes.com
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