Hot With the Haynesville shale expected to contribute as much as 7 Bcf a day into an average 60-Bcf/day U.S. gas market, “I think there’s a reason a number of E&P executives are (supporting CNG as a transportation fuel) and LNG exports as opposed to LNG imports,” says Dan Pickering, co-president and head of research for Tudor, Pickering, Holt & Co. Securities Inc. in Houston.
“This is going to be a big area of gas supply for several years out.”
Pickering and Steve Herod, executive vice president, corporate development, for Haynesville acreage-holder Petrohawk Energy Corp. spoke to Society of Petroleum Engineers members Wednesday evening at an SPE Business Development Study Group program where a large number of attendees for the nearly sell-out program competed for parking at the Four Seasons garage with a Houston HoustonHouRockets basketball game and a rap concert.
The Haynesville is still hot, Pickering says, despite falling natural gas prices and producers’ reduced access to public debt or equity capital. The one bright spot for Haynesville developers in the current capital and commodity-price market? “We do think (falling) service costs are the one clear positive for next year,” Pickering said, his words falling sadly upon the ears of eager service-company representatives in the audience.
Public and private capital is being withheld from the Haynesville play. “(The market) is scared of the funding commitments the Haynesville might require.”
He added that big Haynesville gas will block the movement of South Texas gas to market.
This may be a wash, though, based on comments by Dave Pursell, managing director and head of macro-research for TPH, at Oil and Gas Investor and A&D Watch’s seventh annual A&D Strategies and Opportunities conference in Dallas this Sept. 4. Pursell expects the high-pressure/high-temperature nature of the Haynesville play to take rigs, pressure-pumping, fracturing and other equipment and services from South Texas to northwestern Louisiana and northeastern Texas.
Reduced availability of oilfield services in South Texas could reduce gas output from the region, thus less gas there would be stranded by the Haynesville consuming take-away capacity.
Pickering said, at the SPE event, that operators are reporting that capital access is more important right now than commodity prices. “The credit crisis has everyone spooked.” Producers won’t issue stock at under-NAV prices to fund drilling, and pipeline builders—mostly MLPs—won’t issue units to fund building take-away infrastructure.
“So infrastructure build-out is being delayed by equity markets as well,” Pickering said.
As for natural gas prices, “the only drawback right now to the Haynesville…is it is a tough market…There is too much gas out there…and the Haynesville is not going to make it much better.”
Herod said Petrohawk is putting in its own pipe. The Houston-based E&P is the No. 3 Haynesville acreage-holder (more than 300,000 net) and No. 1 in terms of acreage/EV. “So we are the most pure-play.” Some 50% of the company’s acreage is under lease terms of more than three years, he added. Acreage can be held in the Haynesville by production with one well per section.
–Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch, OilandGasInvestor.com Today, OilandGasInvestor.com, A-Dcenter.com; firstname.lastname@example.org
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