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Dan Dinges
Well, we have seen some data that suggests now
from vertical wells and I think that these are horizontal plays, we have seen some data from vertical wells from the big thick
Haynesville shale, big thick 200 feet thick or more that the initial rates after frac are not all that big. I mean a million
a half a day.
So you can say that where we're drilling, although it is thinner, the similar type of rates had been established
by up in the Minden area with a well that was drilled by the former operator of the property that was bought. So we think
that there's still a lot of upside left in the Haynesville even though it is thinner over in the Minden area.
David Heikkinen
Okay. So maybe I'm reading too much into your decision
to test the Bossier and the Lime first. It sounds like you're going to test the Haynesville on your acreage as well as beyond
just the vertical well?
Dan Dinges
Absolutely
we are.
David Heikkinen
So can you give any
thicknesses as far as what the Haynesville and Bossier are on your acreage as you move to the South?
Dan Dinges
We're seeing the Bossier and we don't break it out into the
so-called Haynesville. I don't buy the terminology. It's all Bossier. It's between 750 and 1000 feet thick and it's all gas
charged.
Chesapeake Energy CHK - Haynesville and Bossier Shales (Northwest Louisiana and East Texas): Chesapeake is the largest
leasehold owner, largest producer and most active driller of new wells in the Haynesville Shale play in Northwest Louisiana
and East Texas. Chesapeake owns approximately 530,000 net acres of leasehold in the Haynesville Shale play, under which
approximately 195,000 net acres is prospective for the Bossier Shale. On its Haynesville and Bossier leasehold, Chesapeake
estimates it has approximately 2.9 tcfe of proved reserves (based on the 10-year average NYMEX strip prices at June 30, 2010)
and 23.7 tcfe of risked unproved resources. The company has drilled and completed 252 gross Chesapeake-operated horizontal
wells in the Haynesville and Bossier since discovering the play in 2007. During the 2010 second quarter, Chesapeake’s
average daily net production of 560 mmcfe in the Haynesville increased approximately 30% over the 2010 first quarter and approximately
315% over the 2009 second quarter. The company’s average daily net production rate in the Haynesville in July
2010 was approximately 615 mmcfe. The company is currently drilling with 35 operated rigs in the Haynesville and anticipates
operating an average of approximately 36 rigs in 2010 to drill approximately 175 net wells. The company anticipates
having the vast majority of its Haynesville Shale leasehold held by production (HBP) by year-end 2011 and as such will have
greater drilling flexibility in the years ahead. Three notable recent wells completed by Chesapeake in the Haynesville
are as follows: - The Sloan H-1 in DeSoto Parish, LA achieved a peak 24-hour rate of 22.2 mmcf per day;
- The
Brasch Family H-1 in DeSoto Parish, LA achieved a peak 24-hour rate of 22.0 mmcf per day; and
- The Wren H-1 in DeSoto
Parish, LA achieved a peak 24-hour rate of 21.6 mmcf per day.
Forest Oil FST - East Texas, North Louisiana - Haynesville / Bossier Shale
- Forest drilled and completed three wells in the third quarter of 2010. In order to optimize recovery from
Haynesville / Bossier Shale wells, Forest has adopted a restricted flow rate production program. With this operating strategy,
initial production rates from the last three wells were curtailed at 11 to 13 MMcfe/d. Results have shown that cumulative
production from the restricted-rate wells has exceeded the cumulative production from comparable unrestricted wells after
approximately 90 days. Further, early indications support expectations that estimated ultimate recoveries for restricted-rate
wells should exceed recoveries for less restricted wells. The Company does not plan to operate any rigs in the play for
the remainder of the year. All of Forest's leasehold in Red River Parish, Louisiana was converted to held by production status
in the third quarter of 2010.
Exxon Mobile XOM - During the quarter, Exxon Mobil finalized a merger agreement with Ellora Energy. This acquisition has increased our position
in the attractive Haynesville Bossier plays by
46,000 acres and added current production and pipeline capacity. In addition, our gas marketing team is working with XTO to
optimize shipping, processing and marketing activities across our United States portfolio. We are also capturing reverse integration
benefits in legacy Exxon Mobil operations both in the United States and overseas.
Petrohawk Energy HK - Lower Bossier Shale - Petrohawk drilled one operated and 15 non-operated wells in
the Lower Bossier Shale during 2010. The operated well, the Whitney 19 #1H in Sabine Parish, Louisiana,
was completed in August 2010. The initial restricted production rate was approximately 8 Mmcfe/d
on a 14/64" choke with flowing casing pressure of approximately 8,300 lbs. Of the 15 non-operated wells, five were drilled
in North Louisiana and ten were drilled in East Texas. Well
performance to date for this limited number of wells indicates that the four wells drilled in the area of the Whitney 19 #1H
have been the best performers with EURs averaging 9 Bcfe. In the entire Lower Bossier Shale play, the industry has completed
approximately 50 Lower Bossier Shale wells. The Company estimates that a large area of commercially productive Lower Bossier
Shale acreage exists across the southern portion of the Haynesville Shale trend of North Louisiana
and East Texas. Petrohawk does not plan to commit significant capital to the Lower Bossier
Shale until late 2012. At that time, given a favorable price environment for natural gas, the Company plans to launch directly
into development of the Lower Bossier Shale, employing any cost saving measures that were successful in the Haynesville Shale,
such as area-specific fracs and pad drilling. Petrohawk currently controls approximately 150,000 net acres in the Lower Bossier
Shale that appears to be commercially productive based on regional well performance and geological data. Assuming 90 acre
spacing and an average EUR of 6.5 Bcf/well, the Company's estimated net non-proved resource potential for the Lower Bossier
Shale is 8.1 Tcf.
Encana ECA - Encana is drilling in the East Texas portion of the Bossier Shale - East Texas focus shifts to Bossier shale -
In East Texas, 2010 natural gas production of 348 MMcfe/d was down slightly from forecast production of 355 MMcfe/d
as volumes dropped off in the second half of the year. Recent test results from the Bossier sands have not met expectations
and as a result Encana is reducing activity levels in this area, focusing more development on the Mid-Bossier shale and new
potential opportunities in other parts of the play.
Exco Resources XCO - Exco Resources (XCO) Bossier Shale - Our horizontal Haynesville shale development program continues to yield outstanding
results. As of July 25, 2011, our Haynesville/Bossier operated production was 1,173 Mmcf per day gross (365 Mmcf per day net)
and with the addition of our OBO wells, we had 391 Mmcf per day of net production. Our development program in DeSoto Parish,
Louisiana is focused on manufacturing on 80-acre spacing. Our program in San Augustine and Nacogdoches Counties, Texas is
focused on delineation and testing of our acreage. During 2011, we plan to drill 241 gross (70.1 net) wells in the Haynesville/Bossier
shale play in East Texas/North Louisiana. Of these 241 wells, 171 gross wells are operated by EXCO. We drilled and completed
47 gross (20.4 net) operated horizontal Haynesville and Bossier wells and participated in 20 gross (0.8 net) OBO Haynesville
horizontal wells during the second quarter of 2011. We utilized 22 operated rigs and spud 42 operated horizontal wells. In
addition to our operated rig count, we typically have 3-6 OBO rigs drilling in the play. During the quarter, 11 OBO wells
were spud. We currently have 232 operated horizontal wells and 123 OBO horizontal wells flowing to sales. The average
initial production rate (“IP”) during the quarter from all of our operated Haynesville horizontal wells in DeSoto
Parish was 18 Mmcf per day on a managed drawdown/restricted choke program. Our manufacturing approach for simultaneous drilling
followed by simultaneous completions by unit is being successfully implemented. We currently have 15 units fully drilled,
completed and flowing to sales on 80-acre spacing and expect to have 25 units fully developed by year end. This high level
of sustained performance in our 80-acre development program underscores the quality and consistency of our shale assets. We
have a strong focus on the capital efficiencies of our drilling and completion programs. The design changes and manufacturing
efficiency gains in both the drilling phase and the completion phase of our wells should result in an overall well cost reduction
of approximately 7% compared to our actual costs incurred in the first half of 2011. These improvements are the result of
more efficient pad and road utilization and construction processes, design changes with drill bit technology resulting in
higher rates of penetration and a more efficient completion design and implementation process, among others. We acquired
the assets in our Shelby area in May 2010. At the time of acquisition, the area total production rate was 34 Mmcf per day
gross from eight operated wells. Our Shelby area is currently producing 222 Mmcf per day gross from a total of 39 operated
wells. Results from our testing and delineation program in our Shelby area are encouraging. In the quarter we completed four
wells in the deeper part of the play in Nacogdoches County, Texas with average IP rates of 29 Mmcf per day with average flowing
pressures of 9,566 psi on 28/64ths chokes. The wells in this area are just over 19,400 feet measured depth with an average
completed lateral length of 4,600 feet. These wells are performing above our original expectations. We drilled and completed
our first horizontal Middle Bossier test well in San Augustine County during the first quarter 2011 with an IP rate of 26
Mmcf per day from a 16 stage fracture stimulation treatment. The Middle Bossier performance is also above our original expectations.
We currently have two Middle Bossier test wells drilling and a total of eight operated rigs running in the Shelby area.
Southwestern Energy SWN - On June 30, 2010, Southwestern closed the previously announced sale
of certain oil and gas leases, wells and gathering equipment held by the company in East Texas.
Total net proceeds from the sale were $355.8 million. The sale included only the producing rights
to the Haynesville and Middle Bossier Shale intervals in approximately 20,063 net acres. The company has retained the drilling
and producing rights covering all other depths in the acreage, including the company's current James
Lime and Pettet drilling programs. Southwestern still has approximately 10,500 net acres with
Haynesville and Middle Bossier Shale potential. The company drilled two wells on this acreage (Hawthorne prospect) in the
second quarter, the Timberstar Blackstone A-1H well targeting the Haynesville Shale formation and the Harris B-1H well targeting
the Middle Bossier Shale formation. The Blackstone well is currently being completed and the Harris well will be completed
in the fourth quarter. A third well, the Crest C-1H, is currently drilling and will be completed in the fourth quarter. Production from the company's East Texas properties was 19.2 Bcfe during the first
six months of 2010, compared to 15.6 Bcfe during the same period last year. Approximately 2.1 Bcfe of company's 2010 production
was related to its Haynesville and Middle Bossier properties which were sold in June. Southwestern participated in drilling
26 wells in East Texas during the first six months of 2010, 9 of which were James
Lime horizontal wells, 13 of which were Haynesville horizontal wells and 4 of which were Pettet horizontal oil wells.
Initial production rates from James Lime wells that were placed on production during the second
quarter averaged 7.2 MMcfe per day and initial production rates from Pettet oil wells that were placed on production during
the quarter averaged 505 barrels of oil per day, with 0.7 MMcf per day of associated gas.
Cabot Oil & Gas COG - Cabot is participating in 16 outside operated Haynesville/Bossier wells that are
currently drilling, completing, or waiting on completion with working interests generally ranging from 10 to 20%. Results
today in the play continue to show production at high initial rates with excellent recoverable reserves. This is true for
both the Haynesville and Bossier formations, so we continue to be encouraged by the Bossier wells on and around our acreage.
Cabot has participated in four Bossier wells in this area. Two of the wells
have been completed and have performed equal to or better than the Haynesville completions. The other two remaining wells
are scheduled to be completed before year-end. This recent success reinforces our belief that our acreage is located in a
core area for both zones. Though unpopular today, our capital allocated this play continues to capture a significant resource
potential for the future.
Gastar GST - In East Texas, third quarter net production from the Hilltop area averaged 20.1 MMcfe
per day, up from 13.6 MMcfe per day in the second quarter of 2010. The increase in volumes was due to the return of
the Belin #1 well to production, following successful operational repairs late in the second quarter, and bringing a new well,
the Donelson #4, on production in late June. Additionally, production during the third quarter was slightly higher than
expected due to the Streater #1, a middle Bossier well, coming on production on September 20
versus early October as originally expected. The well was completed in one zone and is currently producing approximately
7.6 MMcf per day. Gastar has a 100% before payout working interest (76% before payout net revenue interest) in the Streater
#1 well.
Comstock Resources (CRK) - In the East Texas/North Louisiana region, Comstock
has drilled 15 wells (6.9 net) in the first quarter of 2011, all of which were Haynesville
or Bossier shale wells. During 2011's first quarter, Comstock
has completed 13 operated and 8 non-operated Haynesville or Bossier
shale wells which have been put on production at an average per well initial production rate of 11.2 MMcfe per day.
GMX Resources (GMXR) - GMX Resources (GMXR) Haynesville Shale - Our second 2011 production exceeded our guidance and reached a Company record
6.5 BCFE. We drilled four and completed three successful long lateral (~6,500') Haynesville/Bossier horizontal wells during
the second quarter. Production for the quarter was up 8% from the previous quarter and 51% from the second quarter of 2010.
The production performance of our H/B long lateral program continued to exceed our expectations. In fact, the performance
of our 2011 long lateral wells confirms the prior DeGolyer & MacNaughton EUR estimates of 6.5 Bcfe per well. Due to the
continued depressed prices for natural gas and the absence of significant cost reduction for services, we have temporarily
suspended our Haynesville/Bossier development until economics become competitive with our oil development. We have subleased
our fourth H&P FlexRig and will focus all of our remaining 2011 drilling capital expenditure budget on oil development
in the Bakken, Niobrara and other East Texas oil targets.
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