Wednesday, July 23, 2008

Haynesville Shale - XTO Energy Speaks 250 TCF's

The Haynesville Shale, which is located in East Texas and Northwestern Louisiana, has the potential to be bigger then the Barnett Shale which is located in Texas.

XTO Energy ( XTO ) stated in their conference call that they have 100,000 acres in what they believe is the core drilling area. Of course, they would not tell us where that is due to competitive reasons.

XTO also shot down the rumor that their might be 250 trillion cubic feet of recoverable natural gas. Here are a few lines of the XTO conference call.

- The question pertains to some of these announcements, particularly the Haynesville where, suppose there are 750 Ts in place of which 250 Ts are recoverable. Have your engineers looked at these other shales at, are these just wide-eyed expectations for natural gas or is this possible?

Bob R. Simpson CEO - Yeah, if you look at and I am going to let Keith addressed most of this, but I like the flavor of that shale projection. If you look at the Barnett Shale, we're basically 10 years hard into the development of it. And we talk around 50 Ts as addressed. As you get into the plays you would expect to find something that's not as magic, as some overall model might suggest. Now there could be faults in it, there could be... maybe the process where people thought... there is just not enough data for somebody who could say that's proved, even though it's being communicated to you that way.
But that, at this moment, has a tremendous amount of hype in it. Now it may come true, but certainly there is no one in the right mind because of the foggiest idea, that you'll recover 250 T's, our 10-year's U.S supply, that's ridiculous [inaudible]. Now... but they hype artist, okay, they've been hype artists for ever, trace their history. Now, we don't do that, we will tell you yes, we go along. How it's going and you know obviously if you believe it's that easy to fine tune your supply, well then, what is the value of natural gas, it's not zero. And so that's the implication of that, and the danger of that and so the... now there will be areas where it worked more fine, and then apparently they [inaudible] that.
But to extrapolate into that is the greatest gas field approaching in the world. It's just silly and I say that with some experience and I'm dismayed that it's going on frankly. I think it leads to potentially a very [inaudible] things... in fact, there is not a [inaudible] payments. And our credibility is on the line and a lot of other things where they kind of hype.

Keith A. Hutton - President - If we look at Haynesville I mean there really are definitely wells. Most of them are in one particular area, in Louisiana that's fairly, tightly held. Yes you can see it on [inaudible]. That doesn't mean it will come to fruition, I would go to the Barnett Shale and think about the heights that originally surround the Barnett Shale, and it was 5 million acres and 10 counties. If we go back and look at it, it's three counties.
Most of the production is out of Johnson, Tarrant, Denton and Wise. The rest of it is just okay. It does not really add a lot volume, almost all the volume production out of that particular area and that's where most of the reserves are going to from, probably 90% of it out of those three counties, and I think that's probably what Haynes [ph] is doing that if you're going to have some really hot spots, obviously, I think some of these guys have found a couple of them. But, they are talking about 3.5 million to 4 million acres did not be perspective. Yes, that might be true but I don't think it's going to all the highly economic and I don't think it's going to swamp the U.S. gas market and i.e. not shifted.
It's an odd thing to watch people throwing that much firepower out there when they really don't have that much data. You can kind of dream up cases like that, but you need product... well production data to figure it out. You saw that in the Barnett, really Erath, Palo Pinto, Jack, most of that stuff is really not pretty good. Okay, what you here and everybody is [inaudible] and no one is really drilling much out there and there is a lot of acreage that was originally calculated and how big the Barnett was going to be. So just take with a grain of salt for what you are going to see from that field.