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Was October’s Haynesville Shale Natural Gas Production Steady?

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Haynesville Shale natural gas production

The EIA (U.S. Energy Information Administration) estimates that the Haynesville Shale, located in Louisiana, Southwestern Arkansas, and Eastern Texas, produced ~6.0 Bcf (billion cubic feet) per day of natural gas in October 2016. This is according to the EIA’s Drilling Productivity Report released on November 14, 2016.

According to the EIA, natural gas production at the Haynesville Shale has risen 35% in the last eight years. In October 2016, the region produced ~6.0 Bcf per day of natural gas compared to ~4.4 Bcf per day in October 2008.

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Haynesville rigs and monthly additions from the average rig

The number of active rigs at the Haynesville Shale was 20 in October 2016, three more than the previous month. In October 2015, there were 29 drilling rigs in the region. Most of the Haynesville rigs are horizontal in trajectory.

From October 2008 to October 2016, additional natural gas production per rig at the Haynesville Shale rose 3.7x. In the 12 months through October 2016, the natural gas production addition per rig rose only 0.7%.

What does this mean for oilfield services companies?

Steady Haynesville Shale drilling and production activities can lead to steady revenues for oilfield equipment and services providers. Strong drilling, exploration, and production can also help maintain steady margins for companies like Schlumberger (SLB), Halliburton (HAL), Weatherford International (WFT), and CARBO Ceramics (CRR).

WFT makes up 2.6% of the iShares US Oil Equipment & Services ETF (IEZ). The oil and gas equipment and services industry forms ~79% of IEZ. You can read more about WFT in Market Realist’s Did Weatherford International Violate a Debt Covenant?

How fast is production changing in the US shales?

Aggregate crude oil production in these shales fell ~13% over the past year through October 2016. Aggregate natural gas production increased 2% in October 2016 over October 2015.

The EIA’s projections suggest that production at many of these shales could fall further or stagnate within the next two months. We will discuss that in the final two sections of this series.

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