After being left for dead for more than five years, natural gas production in the greater Haynesville region has been surging upward — from about 5.7 Bcf/d this time last year to more than 7 Bcf/d today, an increase of 25% during 2017. Much of this growth has been coming from a new cast of characters, employing different technologies and different strategies than the first wave of Haynesville pioneers that established the play back in 2008, then abandoned it in 2012. But a couple of big challenges face the Haynesville. Today, we begin an examination of the Haynesville that will take us from production trends through producer strategies and finally into detailed calculations of production economics for the play.
We first highlighted the resurrection of the Haynesville in Don’t Call It a Comeback, pointing out that new drilling technology and burgeoning Gulf Coast gas markets had changed the dynamics for a production province that today is “not your father’s Haynesville.” The rags-to-riches-to-rags saga of this play began back in 2008-09, when horizontal drilling and hydraulic fracturing techniques honed first in North Texas’s Barnett Shale were deployed in the “Greater Haynesville” — a region we define as the Haynesville, Bossier and Cotton Valley formations in northwestern Louisiana and East Texas. Production there surged from less than 4 Bcf/d in 2008 to more than 6 Bcf/d in 2010 — almost all of it dry gas containing no economically recoverable natural gas liquids (NGLs). Dry gas meant that new processing plants were not needed, and that expedited infrastructure development to get new production to market. But the lack of NGLs was not so good for the play’s production economics.
With gas as the only hydrocarbon coming out of the wells, drilling slowed dramatically after average annual gas prices dipped below $4.00/MMBtu in 2012. At that point, prices were below what was then the average Haynesville breakeven price, and new wells became uneconomic. Producers continued to drill to hold the acreage they had worked hard to secure (for more on HBP, or held-by-production leases, see Hold on Tight), which fueled more output growth, and the region eventually peaked at more than 10 Bcf/d. But activity subsequently plummeted as drilling moved to the wet-gas parts of the Marcellus/Utica and crude plays in the Eagle Ford and Permian — the Haynesville rig count fell from a peak of 160 in 2011 to just 11 rigs in April 2016. Then, remarkably, this Lazarus of shale plays suddenly arose from the dead, with the rig count tripling in the next 12 months. But the increased drilling activity didn’t trigger a big production response that showed up in government statistics.