Why the Haynesville Shale Rig Count Fell 50% in a Year
Why the EIA Expects the US Shale Production Drop to Accelerate
Haynesville Shale natural gas production
The EIA (U.S. Energy Information Administration) estimates that the Haynesville Shale, located in Louisiana, southwestern Arkansas, and eastern Texas, produced 6.2 Bcf (billion cubic feet) per day of natural gas in January 2016. This is according to the EIA’s Drilling Productivity Report released on February 8, 2016. The Haynesville Shale’s natural gas production in January 2016 was a marginal 0.2% higher than production in December 2015. On a YoY (year-over-year) basis, January’s production was also nearly unchanged.
According to the EIA, natural gas production at the Haynesville Shale has risen 56% in the last eight years. In January 2016, the region produced ~6.2 Bcf per day of natural gas compared to ~4.0 Bcf per day in January 2008.
Haynesville rigs and monthly additions from the average rig
The number of active rigs at the Haynesville Shale was 25 in January 2016, eight less than in the previous month. In January 2015, there were 52 drilling rigs in the region. It’s important to note that most of the Haynesville rigs are horizontal in trajectory.
From January 2008 to January 2016, additional natural gas production per rig at the Haynesville Shale rose from ~1.2 MMcf (million cubic feet) per day to ~5.3 MMcf per day, or by 3.5x. In the 12 months to December 2015, the natural gas production addition per rig rose 17%.
What does this mean for oilfield services companies?
Steady Haynesville Shale drilling and production activities increase the revenues of oilfield equipment and services providers. Strong drilling and production also help maintain steady margins for these companies. Higher production will benefit companies like Baker Hughes (BHI), C&J Energy Services (CJES), Weatherford International (WFT), and Cameron International (CAM). WFT makes up 2.6% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
Have production adjustments started in US shales?
Crude oil and natural gas production at key US shales has risen in the past few years. However, aggregate crude oil production in these shales fell 2.1% over the past year through January 2016. Aggregate natural gas production, on the other hand, increased 5.3% over the past year. The EIA’s projections suggest that production at many of these shales could fall further or stagnate within the next two months.
In the next two parts of this series, we’ll review the EIA’s crude oil and natural gas production forecasts for the major US shales.
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