Denver — Gas production from the East Texas Haynesville could soon rival that from the more mature, proven fields of Louisiana, thanks to recent and growing investment there from some major oil and gas producers.
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Over the past two years, the Haynesville's renaissance has been confined, largely, to the acreage in Louisiana where smaller, independent producers have led the way.
Surging initial production rates, rising internal rates of return and falling breakeven gas prices have seen the basin's production rebound to an estimated 9.9 Bcf/d currently, from just 6.1 Bcf/d two years ago, according to data compiled by S&P Global Platts Analytics. The acreage in Louisiana has now proven itself to be competitive with even the Marcellus and the Utica. Yet, very few of the independent operators there have made their way west, across the state line.
In East Texas counties like Shelby, San Augustine and Nacogdoches, though, global majors ExxonMobil and BP have been rapidly building a presence, more than doubling their rig count there in the last year.
Recent data shows initial production rates in East Texas are still lagging behind those of Louisiana, suggesting that any major investment there could still be a gamble.
According to Platts Analytics, though, there's good reason to believe that the Haynesville's western frontier could soon become a major engine of production growth.
In October, sample production from the East Texas portion of the Haynesville is at a record high, having climbed about 55%, just since January. According to a modeled estimate, production from the area is now averaging about 2.5 Bcf/d--equivalent to nearly one-quarter of the total output from the Greater Haynesville.
Recent production growth from the area comes partly from a build in rigs, but also on the back of improvements in drilling and well performance.
In October, the East Texas rig count has climbed to 21, up from just 12 rigs one-year prior.
A recent sampling of initial production rates shows a less-than linear rise in well productivity. As recently as fourth-quarter 2017, though, the average sample IP rate in East Texas hit a record high 12.2 MMcf/d, which compared favorably to an estimated IP rate at 14.7 MMcf/d in Louisiana.
While producers in East Texas still have some catching up to do, their well productivity has nearly doubled from an average IP rate at just 7.3 MMcf/d in 2016, Platts Analytics data shows.
INDEPENDENTS VS. MAJORS
The recent build in drilling activity in East Texas is perhaps most notable, because it's been led by global majors ExxonMobil and BP, which are currently operating 13 of the region's 20 or so rigs.
In contrast to the smaller independents, major oil companies rarely chase flashy drilling metrics, like IP rates and estimated ultimate recoveries or EUR, which, according to Platts Analytics, are more often used by independents as a means of capturing much needed investor dollars.
With many major oil companies typically favoring more paced, proven and reliable returns, it's notable that at least two of them have chosen to invest in East Texas, rather than Louisiana.
While future outcomes on drilling and well productivity are ultimately unknowable, Platts Analytics does expect East Texas Haynesville production to continue growing. According to the most recent forecast, output from the basin should handily rise to over 3 Bcf/d by late 2019.
-- J. Robinson, Taylor Cavey, firstname.lastname@example.org
-- Edited by Richard Rubin, email@example.com