Tracking Capex in the Haynesville

Data

Before we get started, a bit about where the data comes from.

Louisiana publishes well costs in the application for a severance tax deduction. Sadly, it’s in PDF image form so you have to use OCR image processing, and even then it’s not 100% accurate. I’ve largely removed any values that were inaccurate as best I could tell. On an entire Haynesville data set, I’m probably carrying around 55% of the total wells drilled, largely due to this exclusion of data. Still, that’s a significant number of wells and is likely indicative of total trends.

Texas, in a similar fashion, has a severance tax deduction for well costs, but you have to do some interpretation to determine what the calculation is. The calculation is either 100% accurate, or very close to it.

Completion data comes from a Frac Focus scraper where you have to do a bit of data manipulation to convert water pumped to total proppant.

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Figure 1: 2017+ Haynesville Capex Per Lateral Ft

Exploring this data is possible at my website, AFE Leaks.

The operator breakdown is below:

Figure 2: Well Sample Set for Analysis (~55% of Total Haynesville Horizontal Wells)


Analysis

Claim: Capex Per Ft has consistently decline in the Haynesville.

Facts: Mostly true. Especially since the early days. That seems to have reversed recently though. Every time prices crash (2014/2020) operators rush to say that capex savings are largely efficiency driven, but after years in the industry it seems to me that it’s largely been service cost concessions, which you can see as per-ft costs have picked up.

Figure 3: Cost Per Lateral Ft over time

Proppant loading has picked up as well which may be contributing.

Figure 4: Proppant Loading Trends for Haynesville

Regardless, it looks like we can use 2017+ wells as a pretty good guide to the recent cost environment.

How does lateral length affect proppant loading? It’s a pretty smooth trend and expected. Largely, if you go from a 4000 to 10500 ft lateral, you will see a 1/3 reduction in per-ft costs. Now, this would theoretically be much more economic but we would need to have a good handle on per-ft reductions in EUR, which absolutely exist. Unfortunately I haven’t gotten around to scraping Louisiana production yet so cannot opine on that.

Figure 5: Capex Per Ft by Lateral Length Bin (2017+)

Now, which operators look to be outperforming? We can once again look at the most active operators in the play since 2017. I haven’t gotten around to breaking out acquisitions outside of BP/BHP, so Comstock’s acquisition of Covey Park will be lumped in to Comstock and Aethon/QEP will be Aethon.

Figure 6: Capex Per Ft by Operator (2017+)

Generally most follow the trend, but we can see BP showing up way high. What is going on? Well, if you look at average TVD (True Vertical Depth ie depth of the Haynesville), you can see how deep it is. They recently drilled some impressively productive wells in Angelina County, but that came at quite the cost. From last I heard, they have deemed the project unecomomic (but geez those wells were monsters).

Summary

Anyway, short and sweet and this was largely to show the value of having the full capex data. Unfortunately most of the operators in the play are either large publics, not that active (CHK), or made a large acquistion, so finding announced costs is a bit difficult. Regardless, it seems to me that 1300-1400$/ft is significantly higher than what I see quoted in various valuations.


2 thoughts on “Tracking Capex in the Haynesville”

  1. Pingback: Tracking Capex in the Delaware Basin Wolfcamp - Shale Insights

  2. Pingback: Tracking Capex in the Eagle Ford - Karnes Trough Edition - Shale Insights

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