Shale play `left for dead' gets some love as U.S. gas rises
NEW YORK (Bloomberg) -- A natural gas basin that helped kickstart the shale boom a decade ago is getting a new lease on life as the market recovers.
Production in the Haynesville reservoir will climb for the seventh straight month in June, reaching the highest since October 2014, government data show. Output in the play, located in Louisiana and east Texas, fell to a six-year low last March, pressured by tumbling gas prices and competition from gushier, more profitable wells in Pennsylvania and West Virginia.
As pipeline bottlenecks strand gas supplies in the eastern U.S., the vast network linking the Haynesville to the rest of the country -- along with a new export terminal shipping American gas overseas -- has made production in the play more valuable. Drillers from Exco Resources Inc. to Chesapeake Energy Corp. have refocused resources there to slash production costs, while private-equity backed companies bought assets to do the same.
“Once left for dead, the Haynesville shale in Louisiana and East Texas is in the midst of a resurgence as new well designs bring natural gas gushers to life,” William Foiles, a New York-based analyst for Bloomberg Intelligence said in a May 12 report. “Redesigned wells have since expanded the Haynesville’s untapped potential, with output expected to rise as capital and rigs return.”
Chesapeake has boosted well productivity by using “massive amounts” of sand to extract gas from deeply-buried shale, according to Foiles. Exco has drilled longer horizontal well sections and is fracturing the rock in more places.
The gas market’s rebound has created strong economics to drill in the Haynesville, Hal Hickey, Exco’s CEO, said on a call May 10. Gas futures on the New York Mercantile Exchange have jumped 61% over the past year.
While Pennsylvania and West Virginia have “some really good reserves,” the need for more pipelines and processing plants is “really restricting us at this point relative to our opportunities down in the South,” Hickey said.
