Barnett Shale

McClendon expects Haynesville to be No. 1 by 2015

The Haynesville Shale formation in the U.S. South will become the country’s largest source of natural-gas production by 2014 or 2015, Chesapeake Energy Corp. Chief Executive Officer Aubrey McClendon said.

The formation in East Texas and northwestern Louisiana will, in turn, be eclipsed by the Marcellus Shale in West Virginia, Pennsylvania and New York by 2020, McClendon said today at an investor conference in Miami sponsored by Deutsche Bank AG and broadcast on the Internet. Chesapeake is the second- largest U.S. independent gas producer behind Devon Energy Corp.

The Barnett Shale in north-central Texas is the largest non-conventional source of gas in the U.S., Chesapeake said in its first-quarter earnings statement on May 4. It yielded about 1.4 trillion cubic feet of gas last year, 5.3 percent of U.S. production of the heating and power-plant fuel, according to the Perryman Group, a financial-analysis firm based in Waco, Texas.

Haynesville Shale gas production may peak at 4 billion cubic feet a day in 2014, or about 1.46 trillion cubic feet a year, consulting firm Wood Mackenzie said in a July 2008 report.

The Marcellus Shale may contain as much as 50 trillion cubic feet of recoverable gas, equivalent to more than two years of U.S. consumption, Terry Engelder, a geosciences professor at Pennsylvania State University, estimated last year.

-- Bloomberg News

Chesapeake has bidders for Barnett Shale stake

Chesapeake Energy is in talks with four bidders for a $500 million stake in its Barnett Shale properties in North Texas, the company said Wednesday. Oklahoma City-based Chesapeake also has letters of intent to put about $1 billion of gas-processing assets into a joint venture, Chief Financial Officer Marc Rowland said at an investors conference in Austin. Rowland didn’t identify potential partners or bidders. The deals would continue a string of transactions that the company has done, all generally aimed at providing it with additional cash or reducing future expenses at a time when Chesapeake and other producers are struggling to manage low energy prices and tight credit.

Deals "imminently about to close" include a so-called volumetric production payment of $500 million on Barnett Shale properties. Volumetric production payments call for a buyer to pay a fixed price upfront for a certain amount, or volume, of production from a particular property. Last year, Chesapeake did three similar deals for a total of $1.6 billion. In addition to the volumetric production deals, Chesapeake is also about to sell $300 million of other unidentified assets, Rowland said.

For more, see Thursday's Star-Telegram.

-- Jack Z. Smith

Quicksilver sells Barnett Shale properties for $280 million

Fort Worth-based Quicksilver Resources is selling 27.5 percent of its leasehold interests in the Alliance area in Tarrant and Denton Counties to the Italian oil company Eni for $280 million in cash. Quicksilver plans to use the proceeds to pay down debt. Quicksilver announced today that it is forming a “strategic alliance” with Eni to acquire and develop Barnett Shale natural gas properties “in an area covering approximately 270,000 acres surrounding Quicksilver’s Alliance properties.” Quicksilver will be the operator for the properties. Quicksilver last year paid $1.3 billion for 13,000 acres around Alliance, using $307 million in stock and $1 billion in cash, most of it borrowed.

For a complete report, see Tuesday's Star-Telegram.

-- Jack Z. Smith

Denbury Resources selling Barnett Shale properties

Denbury Resources has agreed to sell 60 percent of its natural gas assets in the Barnett Shale in North Texas to Dallas-based Talon Oil & Gas LLC for $270 million. Plano-based Denbury said production from the properties in Tarrant, Parker and Wise counties averaged the equivalent of 45.7 million cubic feet of natural gas per day in 2008, or 16 percent of the company's 2008 production and 18 percent of its proven reserves as of Dec. 31. Denbury said selling the properties will allow it to focus on its crude oil operations, which it said are more profitable and carry less risk. It said it plans to use proceeds from the sale to pay down bank debt.
—Jack Z. Smith

Industry pressures congress over hydraulic fracturing

The oil and gas industry launched a lobbying campaign to protect hydraulic fracturing from more federal oversight.

Here's the latest, courtesy of the New York Times.

http://www.nytimes.com/gwire/2009/05/07/07greenwire-industry-campaign-targets-hydraulic-fracturing-10572.html

And here's a story from late last year about the potential downsides of hydraulic fracturing.

Gas-removal method may be subject to more rules

-- Mike Lee

Devon sees Barnett peak

Devon Energy Corp., the largest U.S. oil and natural-gas producer, said it expects output in the Barnett Shale gas formation in North Texas to “crest” in the current quarter. David Hager, executive vice president for exploration and production at Oklahoma City-based Devon, commented on Barnett Shale expectations Wednesday on a conference call with investors and analysts. Devon’s output in the formation reached an all-time high of 1.2 billion cubic feet of gas equivalent a day in the first quarter.

Devon is only the latest in a number of observers who believe that the sharp drilling slump will produce an earlier peak in the field's production than earlier predicted. XTO Energy, for example, made its forecast back in February, as we reported here.

-- Bloomberg News