The Haynesville Is Hot

It seems that not a day goes by without some news out of the smoking-hot Haynesville shale. The news flow is downright torrid for such an early-stage natural gas play. Of course, few investors had heard of companies like Goodrich Petroleum (NYSE: GDP  ) or GMX Resources (Nasdaq: GMXR  ) before Chesapeake Energy (NYSE: CHK  ) blew the story wide open back in March. You can hardly blame these companies for flaunting their stuff.

The most typical Haynesville announcement consists of a company updating its acreage position and/or resource potential in the play. Forest Oil (NYSE: FST  ) delivered exactly that sort of press release yesterday.

The Denver-based E&P reported some dreamy figures -- 90,000 net acres with unrisked potential of five trillion cubic feet of gas. This is a far cry from three months ago, when the company was merely saying "we may have opportunities in the Bossier / Haynesville Shale." This amount of gas -- five "T's" in oil-patch parlance -- is the energy equivalent of more than 800 million barrels of oil. Yeah, that looks like an opportunity, all right.

On Monday, Petrohawk Energy (NYSE: HK  ) also updated its ever-growing leasehold. Land that's prospective for the Haynesville/Bossier (two gas-rich shale layers stacked on top of one another in the same region) now stands at a hearty 275,000 net acres. This renders Petrohawk highly levered to the Haynesville -- much more than larger companies like Chesapeake or Hunt-happy XTO Energy (NYSE: XTO  ) . This looks like a positive thing, judging by the company's latest well result.

Petrohawk just completed and production-tested its very first horizontal Haynesville well. With a horizontal well, you drill horizontally to hit the gas contained in a laterally extensive formation. Petrohawk drilled this particular well down 11,000 feet, and then nearly 4,000 feet laterally. To better coax the gas out of the rock, the company also induced fractures at eleven separate intervals.

The grand result of all this effort was a monster well, flowing at a rate of 16.8 million cubic feet per day. That beats reported results from both Penn Virginia (NYSE: PVA  ) and a certain Canadian shale ace. Those are the only other companies that have released production results in the emerging play. When you consider the lack of data and the dramatic share price moves in the space, you'll understand why I'm hesitant to hail the highly Haynesville-oriented hitmen.

Despite its multibagger run this year, Goodrich earns only a three-star rating from Motley Fool CAPS players. Are they missing the boat, or rightfully skeptical? Join the conversation right here.

Chesapeake Energy is an Inside Value selection. Drill into any of our Foolish newsletter services free for 30 days.

Fool contributor Toby Shute's "Hectic Haynesville" portfolio is performing fabulously well over on CNBC's "Million Dollar Portfolio Challenge," but it's only play money. He doesn't have a position in any company mentioned. The Motley Fool's disclosure policy doesn't play around.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 01, 2008, at 11:18 AM, TexasLonghorns wrote:

    The lack of data is directly tied to the fact that the players are trying to keep the lease payments down. As more and more data is released landholders want more and more for their leases. Check out the Shreveport Times website they have a business page directly tied to what wells are doing what and how many rigs are drilling and for whom. This play is HUGE!!! On chokes these wells are flowing more than the pipeline into the area can carry in one day.

  • Report this Comment On July 01, 2008, at 12:57 PM, XMFSinchiruna wrote:

    Selling Petrohawk last year, even though I was up nicely, was one of those moves you just keep regretting and regretting. :)

  • Report this Comment On July 01, 2008, at 6:36 PM, Keeter12 wrote:

    Check out www.gohaynesvilleshale.com for a discussion on the ground.

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