HAYNESVILLE-BOSSIER SHALE: A FRESH
LOOK AT THE EAST TEXAS FAIRWAY
The play took off in less than one year
The Haynesville-Bossier seemingly came from nowhere last spring and in less than a year
emerged as a dominant play in the shale gas landscape. Fast forward to 2009: we now have
109 wells completed and 186 wells permitted on the Texas side. On the Louisiana side, we
have 96 producing wells, 135 wells in various stages of completion and 184 wells permitted.
Industry drilling has de-risked a large play area of roughly 9,000 square miles. Current
production from this play is estimated at 1.0 bcf/day.
What’s driving enhanced well productivity?
In general, industry players agree that there is a sweet spot in Northern Louisiana with
exceptional IP rates. We spoke extensively with a number of producers regarding the drivers
behind the performance of these wells. While there is no singe “magic bullet” emerging at
this time, we are closing in on some likely “culprits” for enhanced well productivity. We
believe that rock properties and depth of burial are the likely drivers. As a result, we are
particularly interested in upcoming test results from wells drilled in Southern Shelby,
Northern San Augustine, and Eastern Nacogdoches counties. In our view, reported IPs in
excess of 10 mmcfe/d from this area would confirm our assessment.
Louisiana gets the limelight, but don’t count out East Texas
While Louisiana is touted for its IP rates, we believe the sweet spot is specifically defined
within portions of Caddo, Bossier, Red River, and DeSoto parishes. Excluding these areas,
we believe East Texas will ultimately prove to be as successful and profitable as Louisiana
based on our geology and experience assessments. To date, producers on the East Texas
side have drilled fewer wells and shared less technology than those on the Louisiana side. In
our view, the East Texas side is still largely in an exploration mode, which contributes to the
noted variations in reported IP rates. However, as the East Texas side approaches
development mode, we expect to see a more realistic range of IP rates with higher lows.
Lastly, we believe that it is not too early to focus on economics. We believe that there is a
trade-off between EUR and costs. While wells in the Louisiana sweet spot are eye-popping,
we believe that there is money to be made within the trend for the producers who are skilled
at getting the best performance at the right price. Based on our modeling, an 8.5 Bcfe well in
East Texas ($7.0 million AFE) generates approximately the same return as a 10.0 Bcfe well
in Louisiana ($9.0 million AFE).