March 30, 2010

Will we see a spike in tight gas drilling in the Rockies this year? A recent surge in permit activity in some of the key tight gas basins would suggest that scenario. According to analysis in the March issue of The Land Rig Newsletter, permits for the four major tight gas basins combined more than doubled from their levels in February, leaping to 230 from 98. An eye-popping jump of 245% was logged in Piceance Basin permitting activity in March, while permits in the DJ and Green River basins more than doubled in the same timeframe.

The tight gas surge would seem counterintuitive in light of recently slumping gas prices, considering that these areas remained moribund in comparison with the shale plays when gas prices collapsed last year. Could it be that the shale plays’ advances in drilling efficiencies and  aggressive multi-frac strategies are migrating to the tight gas plays, bolstering IPs and making these plays more economic despite gas price slippage?

March 23, 2010

Three top operators have consistently increased their drilling programs since early December, as shown by a review of biweekly rig counts by The Land Rig Newsletter’s Biweekly Report. EOG added the most rigs during that stretch, with a burst of activity that accelerated sharply last month. EOG’s total count jumped by 22 since the biweekly period ended December 4, 2009, to 59 rigs for the period ended March 12. EOG also turned up among the top four operators in three of the major unconventional plays, with a combined 26 rigs in the Barnett, Bakken, and Eagle Ford shales. For the period ended Dec. 4, EOG didn’t make any of the top four unconventional play lists.  

Among the other top two consistent gainers since December, EnCana is now running 46 rigs, up 14, and Sandridge has added 13 rigs to its present 22 active units. Other companies that have had growing programs in that timeframe—but not necessarily consecutive biweekly increases—are Chesapeake (+19), Forest (+11), Pioneer Natural (+7), Anadarko and Cimarex (each +6), and Southwestern (+5).

March 16, 2010

Recent weakening of the gas rig count may point to increasing unease about 2010 gas prices and thus a growing attraction for the liquids-rich shale plays, as the outlook for oil prices looks relatively more robust. The oily Bakken continues to surge, of course, while the Eagle Ford has the appeal of a hybrid play, encompassing shale gas, condensate, and oil—perhaps what could be thought of as a built-in “hedging” cushion of sorts as oil and gas prices continue to decouple.

The relative appeal of oil also explains why the Permian Basin registered a strong uptick of 22 in rig count in The Land Rig Newsletter’s Biweekly Report. There’s been significant growth in activity in recent months in the Spraberry Trend. Much of the focus is on another hybrid play—the “Wolfberry,” a multi-frac, low-perm target encompassing together the Spraberry and the underlying Wolfcamp. In late September, the Biweekly Report counted 49 active locations with 29 rigs running in the Spraberry Trend. The latest tally shows 78 active locations with 50 rigs running.

March 9, 2010

Don’t be misled by the apparent big jump in the unconventional rig count in the latest edition of The Land Rig Newsletter’s Biweekly Report. What at first glance is a huge surge in shale counts since the first of the year simply reflects the addition of the sizzling Eagle Ford shale play to the portfolio of major unconventional oil and gas plays the publication tracks.

In fact, even as the Eagle Ford has added an average of about 10% to each of the four biweekly shale counts since the first of the year, the major shale tallies without the Eagle Ford are up only 5% total in that same time. Take away the Eagle Ford from the list of just the major gas shale plays, and the difference is even more marked—and reflects the relative strength in the Bakken oil shale. Sans the Eagle Ford, the remaining five major shale gas plays are essentially flat with where they were eight weeks ago—even dropping 12 rigs in the latest biweekly count.  

March 2, 2010

Since 3Q 2008, Louisiana Haynesville operators have improved drilling efficiencies by 35% despite a challenging operating environment.  Improved horizontal well drilling times are the key driver behind the efficiency gains. According to analysis published in the February issue of The Land Rig Newsletter, from 3Q 2008 through mid-February 2010, average Haynesville spud-to-release times have been slashed by 14 days to 44. However, today’s average Haynesville horizontal is >1,000 ft longer than a comparable well in 2008. Quarter-to-date through mid-February, drillers were able to penetrate 386 ft/day-35% better than the 285 ft/day in 3Q 2008.

While Chesapeake dominates the play, its competitive advantage is limited. In the current quarter, the company’s wells were drilled in 45 days on average. This is only two days better than the No. 2 operator, Petrohawk, and only three days better than the No. 3, EnCana. Meanwhile, the top Haynesville driller is Trinidad at 26%, followed by Nabors at 22%.