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PARTIAL REPORT / SAMPLE – CONTACT BENTEK TO SUBSCRIBE
Production
Monitor Southeast / Gulf
March 2011
In the Spotlight
National Highlights and Key Points
Rig Count BPI
Haynesville Surpasses Ft. Worth Basin (Barnett Shale) (Pg. 7)
2,136 3,087
Southeast Gulf Chesapeake Haynesville Rig Count Could Drop by Half by Year-end (Pg. 9)
808 1,190 Fayetteville Shale Remains a Three-Company Play: BHP to Buy CHK’s Assets (Pg. 11)
BPI on Steady Climb Up on Southwestern Efficiency Gains (Pg. 12)
Inside This Issue
Newfield Moves West in the Woodford to Oil (Pg. 15)
ArkLa – Haynesville………………..........7
Ft. Worth Basin Recovers from Cold Temps One Month Later (Pg. 19)
Arkoma – Fayetteville……………..... ...11
Arkoma – Woodford……………...........15 GMX Resources Extends East Texas Lateral Lengths to 6,000 feet (Pg. 23)
Fort Worth -Barnett ……………...........19
New Schlumberger Technology Could Drop Petrohawk’s Eagle Ford Breakeven Price
East Texas………………………...........23
Texas Gulf Coast Onshore………........27 by 50 Cents (Pg. 27)
LA Gulf Coast Onshore ………….…....31 Eagle Ford May Have a Backlog of 500 Drilled Wells Awaiting Sales (Pg. 28)
ArkLa – Non-Haynesville………..…......33
Offshore …………………………….…...35 Slow Offshore Well Permitting Elicits Criticism, Asset Sales, Earnings Hits (Pg. 35)
Black Warrior ……………………….......39 Oil Likely the Emphasis in the Gulf for Foreseeable Future (Pg. 36)
AL-MS-FL………………………………..41
15
BENTEK Intrastate Pipeline
Data Is Now Incorporated in 10
Basin Forecasts 5
MMcf/d
50
$3.50
40
$3.00
$/Mcf
$2.50 30
$2.00 $1.84 20
$1.50 10
$1.00 -
Non-Haynesville
AL-MS-FL
Barnett
Black Warrior
Woodford
Texas Gulf Coast
East Texas
LA Gulf Coast
Haynesville
Fayetteville
$0.50
$0.00
Barnett Eagle Ford Anadarko- Arkoma - Eagle Ford
Haynesville Fayetteville Barnett
Combo (wet gas) Woodford Woodford (dry gas)
Breakeven $1.84 $2.78 $3.58 $3.66 $3.84 $4.03 $4.01 $4.49
12 Mo. Avg Cash Price $4.24 $4.36 $4.24 $4.24 $4.24 $4.24 $4.24 $4.36
12 Mo. FWD Curve $4.39 $4.39 $4.39 $4.39 $4.39 $4.39 $4.39 $4.39
HOR HOR HOR VER VER DIR HOR VER VER VER
Breakevens for liquids-rich plays assume $80 oil and 3:1 NGL value ratio.
BENTEK PRODUCTIVITY INDEX (BPI)TM: The effective rig count shown on the charts below illustrates the
rig level that is equivalent to the 1Q2005 actual rig count level. This week, the Southeast/Gulf is effectively
operating the equivalent of 1,190 rigs compared to the actual rig count of 808. This explains why production
has not fallen sharply, even though the active rig count is still much below its peak reached in 2008.
3,000 1,200
2,500 1,000
# of Rigs
# of Rigs
2,000 800
1,500 600
1,000 400
500 200
0 0
Actual Rig Count BPI Effective Rig Count Actual Rig Count BPI Effective Rig Count
30
Bcf/d
15
25.
Bcf/d
20
10
15
10
5
5
- 0
Other ARKLA East Texas Gulf Coast Of f shore Arkoma Ft. Worth Other ARKLA East Texas Gulf Coast Of f shore Arkoma
15
10 Previous Model
5 Miss
0
1,200 1,200
1,000 1,000
800 800
600 600
400 400
200 200
0 0
Total Directional Horizontal Vertical Total CBM Gas Oil Oil & Gas
DISCLAIMER. THIS REPORT IS FURNISHED ON AN ―AS IS‖ BASIS. BENTEK DOES NOT WARRANT THE ACCURACY OR CORRECTNESS
OF THE REPORT OR THE INFORMATION CONTAINED THEREIN. BENTEK MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE
USE OF ANY INFORMATION CONTAINED IN THIS REPORT IN CONNECTION WITH TRADING OF COMMODITIES, EQUITIES, FUTURES,
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THIS REPORT OR THE INFORMATION CONTAINED THEREIN, WHETHER BASED ON WARRANTY, CONTRACT, TORT OR ANY OTHER
LEGAL THEORY.
ICE PRICE DATA: ICE Index Data used herein is provided under BENTEK’s AGREEMENT FOR THE PROVISION OF INDEX DATA with ICE.
Recipients of this report acknowledge that the ICE Index Data and reports thereon are confidential and are proprietary trade secrets and data of
either Distributor or its licensors/suppliers. Recipients shall use best efforts to prevent the unauthorized publication, disclosure or copying of the
ICE Index Data. Recipient may use ICE Index Data solely for valid purposes related to its own internal business activities and for no other purpose.
NO WARRANTIES, LIABILITIES, OR OBLIGATIONS ARE ASSOCIATED WITH ICE INDEX DATA, INCLUDING WITHOUT PREJUDICE TO THE
GENERALITY OF THE FOREGOING, THE IMPLIED CONDITIONS OR WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, AND NON-INFRINGEMENT.
Forward basis and price data provided by NYMEX ClearPort.
Methodological Notes
The data in this report are derived from BENTEK Energy’s proprietary Energy Data Warehouse. BENTEK collects and monitors pipeline
nominations as posted on individual pipeline electronic bulletin boards (EBBs). BENTEK has assigned geographic and usage descriptions, such as
state, province, county, production region, customer type and connected party to more than 26,000 pipeline points. The descriptions assigned to
these pipeline data points enable users to monitor and forecast U.S. production, U.S. imports, U.S. LNG sendout, demand from multiple sectors
and storage injection and withdrawal activity.
BENTEK PRODUCTIVITY INDEX (BPI)TM: In order to quantify the effects of improved drilling and completion technologies along with the transfer
of rigs to unconventional plays with higher productivity, BENTEK has developed the BENTEK Productivity Index (BPI)TM. By benchmarking the
productivity of each operating rig in the 1Q2005, BENTEK quantified the effects of both technology and gas-resource-play development.
BENTEK defines an active rig to be a rig that has commenced drilling a well (spud) until the point at which the rig has been released from the well
in order to allow completion activities.
The BPI is determined by a combination of rig proficiency and well productivity. BENTEK begins with data provided by RigData on how many rigs
are actively drilling in a basin or region and the average number of days it takes for those rigs to drill wells. The average number of days is divided
into 365 days per year to find an average number of wells drilled per year per rig. The wells-per-rig-per-year number is multiplied by the 30-day
initial production rate for the basin or region to determine the average productivity rate for the current time period. That number is then divided by
the baseline productivity rate from 2005 to get a ratio. BENTEK then multiplies the ratio by the current rig count to estimate the BPI.
Numbers from individual basins and regions are averaged to determine a national average.
BREAKEVEN PRICES: BENTEK defines breakeven gas prices as the well-head gas price at which the before-tax, cash internal rate of return
(IRR) on the project is 10% (the net present value is zero at a 10% discount rate). BENTEK collects announced production data for the key
operators in selected natural-gas plays/basins. Data sources include investor presentations, press releases, reported financials and industry
publications. Breakeven prices are determined using a representative set of assumptions for each play.
BENTEK’s breakeven prices are based on half-cycle well economics. The half-cycle breakeven price is the gas price required to earn the required
rate of return excluding previously sunk capital, such as exploration and acreage costs. The components of the breakeven analysis are Drilling and
Completion (D&C) costs, Initial Production (IP) rates, Operating costs, Production Taxes, Annual Production Declines and Royalty rates. D&C
Costs are the costs to drill, case and prepare a well for gas production. The IP rate is the amount of gas initially produced from a well. The
Operating costs include lease operating expense, and gathering and transportation costs. The Production Tax, also referred to as Severance Tax,
is the tax levied by state governments on gas production. The Annual Production Decline is the natural decline in gas production from a well. The
Royalty rate is the fraction of revenue from gas production paid to the leaseholder.
BENTEK's PRODUCTION PROJECTIONS are based on state wellhead production data provided by HPDI, LLC. Each projection starts from the
last completed dataset and then projects production into the future using type-curves for each basin based on drilling orientation and resource
target.
BENTEK does not assume a base decline rate in its production projections. Production is forecasted on a well-by-well basis based on the current
producing age of each well and where production from that well is on its current decline curve. Well counts are assumed to be flat from the previous
month's drilling level, except where noted due to basins with an inventory of wells that are awaiting pipeline expansions and/or completions
9.0
The first large shale play, the Barnett Shale, has for years
8.0
also been the largest producer. That changed last month.
7.0
After the effects of production freeze-offs lingered in the Ft.
Worth Basin, output from the Haynesville Shale play in
6.0
Louisiana grew. On Feb. 12, BENTEK’s sample of
Bcf/d
5.0
production (which now includes both intrastate and
4.0
interstate pipelines), reached 5.32 Bcf/d. On that same day,
3.0
Ft. Worth production, correcting for sample size, was only
2.0
5.23 Bcf/d. In the 11 days to follow, Haynesville kept its
1.0
lead. The Haynesville area now has the largest production
0.0 of any shale-dominated area in the world.
It is remarkable how fast Haynesville has grown compared
Interstate Sample Intrastate Sample to the Barnett. The latter was a proving ground for shale
development, and it took about nine years (cont’d, Pg. 9)
Current Projected Flows Last Month Projected Flows
Capacity
6000
140 450
400
120
5500
350
Well Inventory
100
Rigs, Wells
300
5000
80 250
60 200
4500
150
40
100 4000
20
50
0 0 3500
Bcf/d
Number of Rigs
500
2.5
400
2.0
300 1.5
200 1.0
0.5
100
0.0
-
Gulf South Centerpoint ETC Tiger Pipeline Other Tennessee Texas Gas
Actual Rig Count Effective Rig Count
Directional Drilling
2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4
Average Time to Drill 49 54 43 52 46 33 40 33 22 55
Time to Drill Sample 19 20 26 9 6 6 7 5 1 4
30-Day Inital Production Rate (Mcf/d) 2,469 6,250 3,779 4,690 5,117 4,824 7,897 7,209 8,766 -
IP Sample 17 10 19 26 12 6 11 7 2 -
IP Additions Per Year 18,392 42,245 32,078 32,920 40,602 53,356 72,060 79,736 145,436 -
Vertical Drilling
2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4
Average Time to Drill 21 20 21 20 23 24 23 31 24 28
Time to Drill Sample 192 144 61 23 22 9 13 10 8 10
30-Day Inital Production Rate (Mcf/d) 836 886 704 1,243 810 1,124 3,121 1,977 888 1,082
IP Sample 172 153 108 37 13 22 12 11 13 2
IP Additions Per Year 14,530 16,170 12,236 22,685 12,854 17,094 49,529 23,278 13,505 14,105
2.5 100
2.0 80
1.5 60
1.0 40
0.5 20
0.0 0
Top Operators
Well Orientation
Ranked on Total Active Rig Count Week: 02/25/11
Hor Dir Ver Total
1 Chesapeake 32 0 0 32
2 Petrohawk 20 0 0 20
3 Encana 14 0 0 14 Drilling Orientation of Active Rigs
4 Exco Resources 14 0 0 14
140
5 Shell 7 2 0 9
6 El Paso 4 0 1 5 120
7 Questar 4 0 0 4 March 2008:
8 Comstock Resources 3 0 0 3 100 Chesapeake announces
9 Beusa Energy 2 0 0 2 Haynesville discovery
80
10 Exxon Mobil 2 0 0 2
11 J-W Operating Company 2 0 0 2 60
12 EOG Resources 2 0 0 2
13 WS 1 1 0 2 40
14 Samson 1 0 0 1
20
15 Nadel & Gussman - Jetta Operating 0 0 1 1
Other Operators 2 0 2 4 0
Total 110 3 4 117
Arkoma – Fayetteville
Arkoma – Woodford
Fort Worth – Barnett
East Texas
Texas Gulf Coast Onshore
LA Gulf Coast Onshore
ArkLa – Non‐Haynesville
Offshore
Black Warrior
AL‐MS‐FL