Why Haynesville’s Natural Gas Production Fell 4% in a Year
Estimates for Key Shales: Will Crude Oil Production Fall in June?
Haynesville Shale natural gas production
The EIA (U.S. Energy Information Administration) has estimated that the Haynesville Shale, located in Louisiana, southwestern Arkansas, and eastern Texas, produced ~6.1 Bcf (billion cubic feet) per day of natural gas in April 2016. This estimation is based on the EIA’s Drilling Productivity Report released on May 16, 2016.
The Haynesville Shale’s natural gas production in April 2016 was 1% lower than its production in March 2016. On a YoY (year-over-year) basis, April’s production fell 4%.
According to the EIA, natural gas production at the Haynesville Shale has risen 45% in the last eight years. In April 2016, the region produced ~6.2 Bcf per day of natural gas compared to ~4.2 Bcf per day in April 2008.
Haynesville rigs and monthly additions from the average rig
The number of active rigs at the Haynesville Shale was 16 in April 2016, one less than in the previous month. In April 2015, there were 32 drilling rigs in the region. It’s important to note that most of the Haynesville rigs are horizontal in trajectory.
From April 2008 to April 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 3.2x. In the 12 months leading up to April 2016, the natural gas production addition per rig rose 13%.
What does this mean for oilfield services companies?
Steady Haynesville Shale drilling and production activities can lead to steady revenues for oilfield equipment and services providers. Strong drilling, exploration, and production also help maintain steady margins for companies such as Baker Hughes (BHI), C&J Energy Services (CJES), Weatherford International (WFT), and CARBO Ceramics (CRR).
CJES makes up 0.01% of the iShares Russell 2000 ETF (IWM), but for investors looking for exposure to the energy sector, energy makes up 2.8% of IWM.
How much US shale production adjustments have kicked in?
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 has fallen 8% in the past year ending April 2016. Aggregate natural gas production, on the other hand, has risen ~4% 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.
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