Last month, I told you that the Eagle Ford shale play in South Texas is the "play du jour." Industry participants are piling into this play like crazy -- from big boys like BP (NYSE: BP) and Chesapeake Energy (NYSE: CHK) to small fries like Rosetta Resources (Nasdaq: ROSE) and Swift Energy (NYSE: SFY).
Encouraging early results are now being reported regularly. But before we start scoping out the latest numbers, let's revisit the theme of well test PR hype.
I took a stand against 24-hour well test reporting last year, when blowout numbers were being reported in the Haynesville shale. In many cases, those numbers are highly misleading, as these flow rates tend to decline dramatically.
Take the case of Devon Energy (NYSE: DVN), which reported a 30.7 million-foot-per-day stunner late last year. On its fourth-quarter conference call in February, Devon disclosed that after 90 days, the well was flowing at "a little over three million cubic feet per day."
I'm a little less worried about these sorts of stunts going forward, now that the industry seems to recognize that lower initial flow rates should help to maintain pressure, avoid formation damage, and increase ultimate recovery. Petrohawk Energy (NYSE: HK), for example, announced in its fourth-quarter release that the firm is expanding its use of "restricted rate production practices" in the Haynesville.
I'm still not crazy about 24-hour rates, and vastly prefer to see 30-day or peak-calendar-month rates, but I suppose there's also an argument to be made for getting new information to investors quickly. I think I will back off my hard line against relaying this information, but I will also try to put it in its proper context for you. That's something the companies themselves are not always eager to do.
