Haynesville’s Economics, LNG Exports Lead To Renaissance
SHREVEPORT, La.—The Haynesville is the only shale gas play to reinvent itself, said Welles Fitzpatrick of SunTrust Robinson Humphrey. That’s the message the analyst came to the stage at the 2nd Annual DUG Haynesville conference and exhibition to deliver to a packed Shreveport Convention Center on Feb. 20.
Fitzgerald didn’t stop there as he told the audience the reinvention is entirely driven by technology. Additionally, the Haynesville has a lower decline rate than other plays in the U.S., which he added will provide a springboard for the companies in the play.
He also said exports are shaping the future of natural gas and it’s positive on the pricing side.
Drillinginfo’s Bernadette Johnson said natural gas prices will average $2.75 per thousand cubic foot in 2019. She added that LNG exports are the big driver of growing demand for U.S. natural gas and said Drillinginfo expects exports to reach 11 billion cubic feet per day (Bcf/d) by 2023.
BPX Energy’s Mohit Singh told the crowd the company is focused on delivering free cash flow growth. BPX combines the legacy assets of BP Plc (NYSE: BP) in the Lower 48 with the acquisition of BHP Billiton’s U.S. onshore assets, which have doubled BPX’s production in the Haynesville and tripled its acreage position. The company is currently running six rigs in the Shelby Trough and Singh said the company plans to keep them running throughout the year.
Tellurian Inc. (NASDAQ: TELL) continues to lead the way to LNG exports out of Haynesville, according to John Howie, senior vice president of upstream at Tellurian.
Howie said the Driftwood LNG terminal will be supplied by low-cost gas. He added that the Haynesville Global Access Pipeline will move Tellurian’s equity gas from the Haynesville to southwest Louisiana.
The Haynesville’s gas was the catalyst for Tellurian’s choice to make upstream acquisition efforts. He also said the low-transportation costs to the export terminal were another logical factor.
Earlier in the day, Rob Turnham, president and COO of Goodrich Petroleum Corp. (NYSE: GDP), opened the conference with a look at the Haynesville’s renaissance. He pointed to the Haynesville’s favorable economics as the driving force. Specifically, he said low finding and development costs, abundant availability of good service companies, great takeaway capacity and geographic location are the main drivers of the region’s shale plays. Goodrich announced favorable results in September at its Harris-Dickson14&23 numbers 1 and 3 in Red River and DeSoto parishes, La., which Turnham attributed to the critical role of technology. He said evolving completions that maximize near wellbore stimulations have “been a game-changer in the play.”
An A&D panel also took the stage in Shreveport featuring Alan Smith, Rockcliff Energy CEO and Chairman; Geoff Roberts, managing director and head of U.S. A&D at BMO Capital Markets; and Chris Atherton, EnergyNet’s CEO. The A&D panellists advised attendees to take advantage of the positive characteristics of the Haynesville basin, but agreed that companies need a very long-term outlook and financial wherewithal to stay the course.
Additionally, the panellists noted that midstream deals are taking a dominant position in all Haynesville transactions. Premiums are being paid for midstream components, they said.
Frank Tsuru, president and COO of Indigo Natural Resources LLC, updated attendees on his company’s success in the Haynesville. Indigo has eight rigs running and Tsuru said the privately-held natural gas producer achieved an average lateral length of 7,250 ft in 2018. Indigo also has 4.5 trillion cubic feet of proved reserves and is producing more than 1.3 billion cubic feet per day gross. Tsuru noted the close relationship between Indigo and Momentum Midstream LLC has also been instrumental for growth.