There's Still Hope for the Texas Haynesville Hype

Early in 2008, Chesapeake Energy (NYSE: CHK  ) unveiled the Haynesville shale play to the world. The subsequent industry frenzy that has rocked Northern Louisiana is pretty amazing.

This week, Encana (NYSE: ECA  ) announced that it's producing around 250 million cubic feet (Mmcf) per day from the play, 10 times the average first-quarter volume last year. Petrohawk Energy (NYSE: HK  ) is producing more than 500 Mmcfe per day on a gross operated basis. Chesapeake, which is in a joint venture with Plains Exploration & Production in the play, has the biggest leasehold of all and is the area's largest producer.

Portions of this play are certainly living up to the hype. Over in East Texas, though, the results have been decidedly mixed.

Devon Energy (NYSE: DVN  ) gave everyone a lot of hope with its Kardell well late last year, leading to lots of talk about a second core area on the Texas side of the play. This well test also let Devon's partner opportunistically recapitalize. On its fourth-quarter call, however, Devon acknowledged that the Kardell flow rate had fallen by around 90% in just a matter of months.

There may yet be hope for the Texas hype, however. EXCOResources (NYSE: XCO  ) and partner BG Group this week agreed to snap up private player Common Resources, which has a good foothold in this part of the Haynesville play.

Actually, the Haynesville may not prove to be the primary target at all. Devon has spoken about the Bossier being thicker in this area, and folks like EOG Resources (NYSE: EOG  ) and Cabot Oil & Gas (NYSE: COG  ) have turned in some strong-looking Bossier well results. If Devon, EXCO, and the rest of the folks active in this area can produce from the Bossier without experiencing such ferocious declines, they may be on to something good.

Chesapeake Energy is a Motley Fool Inside Value selection. Drill into any of our Foolish newsletters today, free for 30 days.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his Motley Fool CAPS profile or follow his articles using Twitter or RSS. The Fool owns shares of Chesapeake Energy. The Motley Fool has a disclosure policy.

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