Chesapeake, Petrohawk, XTO, others lay claim to huge gas reserves

Implications: Adam Nossiter in Mansfield, Louisiana reported in the July 30 issue of the International Herald Tribune that landowners in DeSoto Parish were getting million dollar checks for their royalty interests. It is related to the latest non-conventional natural gas play in the Haynesville shale. Some months ago, leases were selling for a few hundred dollars. Now they are going for $30,000/acre. The boom began in March of this year when news arrived of a productive new well in the area. It is uncertain how much land is underlain by the shale but some energy experts think it is possibly the largest natural gas deposit in the lower 48 states. The formation is 13,000 feet deep and extends into East Texas. Hotels and bars in Shreveport, a town near the Texas line are full of oil company land men. Chesapeake Energy and Petrohawk energy are paying top dollar to gain control of land. At least five wells are three to five times as productive as comparable formations elsewhere.

Analysis:  The Haynesville shale is not really a new discovery. Drillers have known about it for years. What is new is that Chesapeake Energy studied the shale properties of the Haynesville for several years before deciding to drill delineation wells. The vertical test wells flowed sufficient volumes of natural gas to convince the Chesapeake engineers that, properly stimulated, horizontal wells would have extraordinary flow capacities. So far this has been the case. Operators have flocked to the area and over a million acres in Webster, Bienville, Caddo and DeSoto Parish are leased. Interest has spread to Panola and Shelby Counties in Texas. Recently Petrohawk released test data on their Elm Grove Plantation well #63 which was drilled to 11,005 feet true vertical depth. The well found 212 feet of pay and tested at 16.8 million cubic feet/day on choke. Open flow potential would be much greater. With the fantastic and growing production from the Barnett Shale in the Fort Worth basin, the potential of the Woodford in the Arkoma basin, the Marcellus in Appalachia and the Fayetteville in Arkansas, it should come as no surprise that good test results in a few Haynesville shale wells sparked a drilling boom. Geologists studying the potential of all sources of non-conventional natural gas are coming to the conclusion that the resource base is much larger than anyone thought. The future of this business looks good and in fact it is possible that late 2009 or 2010 could see enough production to bring prices down.