Don't Call It a Comeback - It's Not Your Father's Haynesville Natural Gas Shale Play

For the first time in six years, pipeline flow data show that natural gas production from Louisiana’s Haynesville Shale is rising. Additionally, rig counts and producers’ plans suggest more growth is on the way. Is the play poised to create a whole new crop of Bayou Billionaires?  Or is this a head fake that will only make us long for days of Haynesville past.  Well, it depends.  Because even though the Haynesville basin is looking up, it still faces some formidable challenges, from its geology to competition from other supply regions. Today, we continue our look at Haynesville’s prospects.

We last wrote about the Haynesville Shale a couple of months ago in Part 1 of Don’t Call It a Comeback. At the time, we noted the bright neon signs indicating that the pure-gas play along the Texas-Louisiana border was attractive again — the ramping up of rig counts, the entrance of new Haynesville-dedicated operators in the region, and the increased drilling efficiencies being achieved. The only thing that was missing was, well, an actual increase in production volume from the region. By several accounts, it looked like a comeback. But production data was not reflecting that, at least not then. In the three months since, the evidence of a comeback has continued to pile up. Rig counts, which in mid-April 2017 were already up 200% to 37 total, from just 12 a year earlier, have climbed by another six rigs to 43 total, as of the July 14 Baker Hughes weekly rig count report. That means the rig count is nearly back to where it was in 2014, when Haynesville production was nearly 1.0 Bcf/d higher than it is now. Additionally, key operators like Goodrich Petroleum Corp., Chesapeake Energy and others in their first-quarter earnings calls affirmed plans to continue ramping up drilling in the region.

But now there’s additional proof of Haynesville’s revival — an actual increase in production volumes. Daily pipeline flow data — courtesy of our friends at PointLogic Energy — shows that Haynesville gas production is on the rise now for the first time since 2011. In other words, the data show new drilling is starting to more than offset the natural declines from the legacy wells for the first time in more than five years. If we aggregate the daily production into monthly average volumes from the Haynesville, including from Texas (orange area in Figure 1) and Louisiana (blue), we can see that Haynesville volumes have been declining since early 2012, initially falling steeply from more than 9.0 Bcf/d to 6.0 Bcf/d, and then at a slower pace starting in late 2013 until it hit bottom at just under 5.0 Bcf/d in November/December 2016. But that trajectory has shifted in 2017. After declining for eight out of 12 months last year, monthly average volumes have posted month-on-month increases for seven months straight. As shown in the right graph in Figure 1, the result has been a cumulative increase of 0.4 Bcf/d since January, with most of that coming on in the last two months. That puts Haynesville production at just over 5.3 Bcf/d in M-T-D July. 

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