Production in Louisiana’s Haynesville Shale has been steadily climbing since the beginning of 2017. The basin enjoys close proximity to growing demand in the Gulf Coast, economics competitive with any dry gas play in the country, and has been unencumbered by the infrastructure constraints impacting most US shale basins. (For BTU’s previous coverage of Haynesville dynamics, click here.) But gas market dynamics are expected to change in a hurry as new infrastructure brings new gas supply to the Gulf Coast next year. Could the Haynesville’s time in the sun be coming to an end?
The chart below shows the trend in regional activity. The rig count in NW Louisiana rose from 20 rigs at the end of 2016 to approximately 30 rigs, which has been maintained for much of 2018. And even though a few rigs have dropped off, the monthly count of wells drilled has held up for much of the year, averaging 27 wells per month in 2018 compared to 22 wells per month in 2017.
Most of these newly drilled wells are coming from the top 9 operators in the region, with those operators accounting for 91% of total wells drilled, the region is amongst the most concentrated of US shale basins. GEP Haynesville, Indigo Natural Resources, and Chesapeake led the way in 2018 accounting for 60% of the wells drilled in 3Q18.
Within the region, most of the activity witnessed since 2017 has been centered in De Soto, Caddo, and Red River Parishes with the majority of 3Q18 activity in De Soto Parish.
Production from the region is up almost 3 Bcf/d over the past two years to 6.4 Bcf/d, and if the most active drillers in the region continue at their current pace, the region is set to grow almost 1.5 Bcf/d by the end of 2020.
Is this growth possible with current infrastructure and gas flow dynamics? Can the market handle continued Haynesville growth, in addition to growth from Appalachia and the Permian? In an oversupplied market, which basin will cry uncle first? For these answers and more, request a sample of BTU Analytics’ Upstream Outlook.