Haynesville Shale
By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)

In the past 12 months, we have watched the price of a barrel of oil climb from $62, smash through the psychological barrier of $100 a barrel, and reach this past Friday’s record closing of $116.75 per barrel. We have watched the price of a gallon of gasoline soar from $2.87 to $3.39 a gallon. And for good reasons we have focused our attention on the cost of crude oil and gasoline; however, there is another side to Louisiana’s oil and gas industry, and that’s natural gas.

Today there are 1,815 drilling rigs operating in the United States, 355 of those are drilling for oil and 1,451 are drilling for natural gas. There are 60 rigs drilling in the Gulf of Mexico, one rig drilling for oil and 59 drilling for natural gas. It’s kind of incongruous; we call it the oil industry, when in fact, Louisiana is big into the natural gas business. Of the 89 barge and land rigs operating in Louisiana, approximately 75 are drilling for natural gas.

The hotspot in the state is in North Louisiana, with 47 rigs running, most of which are drilling for natural gas. For decades the average North Louisiana rig count has been in the area of 12 to 22 rigs. With the recent announcement of a new natural gas play, I will not be surprised if the rig count climbs to 70 rigs by this time next year. There are some extremely exciting things going on in the natural gas patch in North Louisiana and it’s called the Haynesville Shale.

“At a time when it seems everyone in the industry is hunting for the US' next big exploitation play, the Haynesville shale in north Louisiana debuted on the energy stage early last month during conference calls by small operators Goodrich Petroleum and Petrohawk Energy. But the play really captured rave reviews when shale slugger Chesapeake Energy revealed its presence there a couple of weeks later”, said platts magazine.

On March 24th, Chesapeake Energy Corporation, the largest independent and third-largest overall producer of natural in the U.S. announced their Haynesville shale discovery in Louisiana: “Based on its geoscientific, petrophysical and engineering research during the past two years and the results of three horizontal and four vertical wells it has drilled, Chesapeake believes the Haynesville Shale play could potentially have a larger impact on the company than any other play in which it has participated to date.” For the past two years Chesapeake has quietly leased 200,000 acres in North Louisiana and has a leasehold acquisition effort underway with the goal of owning up to 500,000 net acres.

It is important in to keep in mind, the Haynesville Shale is in its infant stage. “But until some solid repeatable well data emerges, the Haynesville will remain more a diamond in the rough than diamond ring”, said platts. As BMO Capital Markets analyst Dan Mc Spirit rightly noted in a report last week: "The proof (of Haynesville economics) is in how the wells get drilled and the rates of return such operations yield." He added, "These are early innings. Lasting value creation should be revealed later in the game."

As much as I dislike the word “boom”, there are likely the beginnings of one in North Louisiana. Just how vast an area the Haynesville Shale covers, I don’t know, but I have been told from good sources it spreads out into five North Louisiana parishes. The economic impact on the state and North Louisiana from the Haynesville Shale play could be very big. Time will tell just how big.