Haynesville Update—1: North Louisiana gas shale's drilling decline precipitous

Dec. 2, 2013
The Haynesville shale in Louisiana has been actively developed since its discovery in 2007, but over the last 2 years there has been rapid retrenchment and a precipitous decline in the number of new wells drilled in the formation.

Mark J. Kaiser
Yunke Yu

Louisiana State University
Baton Rouge

The Haynesville shale in Louisiana has been actively developed since its discovery in 2007, but over the last 2 years there has been rapid retrenchment and a precipitous decline in the number of new wells drilled in the formation.

To better understand trends and future prospects in the Haynesville shale, this series of four articles will review drilling activity, reserves positions, development cost and profitability in the play. The series concludes with a production forecast in the region.

In this article, we summarize drilling, production, and reserves statistics. Average production profiles in the Haynesville formation have improved over time reflecting better identification of sweet spots, technical innovation, and improved completion designs.

In 2011, the expected recovery volumes were 5.7 bcf/well for a single-well lease and 7.4 bcf/well for a multiwell lease. Recovery volume per foot of horizontal displacement is 1.1 MMcf/ft for single-well leases and 1.6 MMcf/ft for multiwell leases.

We estimate that the total expected recovery from the 2,248 producing Haynesville wells circa March 2013 to be 13.9 trillion cu ft.

Rise and fall

The first wells targeting the Haynesville shale were drilled in 2007, and in 2008, 75 wells were completed in the formation. Within 3 years, gas production in the state doubled (Fig. 1), but by 2012, sustained low gas prices and poor economics reduced investor interest and most operators in the Haynesville impaired reserves.

In 2012, the Haynesville formation produced 2.1 tcf gas and contributed 70% of the state's total gas production (Fig. 2), but production is in decline and growth in the region is unlikely to be sustainable if gas prices remain in the $4-5/Mcf range.

A large number of wells are required in unconventional development, and because of the ultralow permeability and heterogeneous nature of shale formations and the requirements of stimulation, performance risk is high. Early on, it was widely believed that regional variations in formation quality were relatively minor, and that completion technology was the primary determinant of production and economic success. Today, geologic controls on production have increased and are understood to play a significant role in identifying sweet spots and the best locations to drill.

Resource plays are statistical in nature, and most of the relevant indicators are sensitive to location, operator, year, technology application, and related other factors, which make aggregate evaluations susceptible to analysis bias. In this assessment, we applied unique data sets and carefully controlled granular categories to inform the evaluation.

Drilling and completion activity

Spud and completed wells

In 2008, 180 wells were spudded and 75 wells were completed in the Haynesville shale, and in 2009, 554 wells were spudded and 361 completed (Table 1). From 2007 through 2012, a total of 2,414 wells were spudded and 2,250 completed.

Rig counts

Rig counts increased rapidly in the eight-parish region comprising the Haynesville (Bienville, Bossier, Caddo, DeSoto, Natchitoches, Red River, Sabine, Webster) after the gas price spike in 2008.

However, as gas prices began to moderate and performance risk and economics became better appreciated, rig counts declined as rapidly as their build-up (Fig. 3). Today, rig counts appear to have stabilized at 20 rigs/month in a wait-and-hold pattern.

Most rigs drilling in the Haynesville are high spec, premium fixtures rated to 1,000-2,000+ hp drawworks, 3,000-4,800 hp mud pump capacity, and 20,000-35,000 ft drilling depth.

Rig count and the number of wells spudded in the Haynesville are closely correlated, and at its peak in March 2010, nearly 100 wells were drilled in the Haynesville (Fig. 4). Two years later, less than 10 wells/month were being spudded in the region.

Well configuration

Over 90% of all wells drilled in the Haynesville have a vertical depth of 11,000-13,000 ft and measured depths of 15,000-18,000 ft (Fig. 5).

Horizontal displacements range between 4,000 ft and 5,500 ft, and 70-80% of the lateral is perforated, most frequently with pumpdown plug and perf technologies using 13-16 stages (Fig. 6).

In 2008, the average Haynesville well was drilled to 11,500 ft true vertical depth, 14,700 ft measured depth, and 4,470 ft horizontal length. In 2012, the average Haynesville well was drilled 12,270 ft TVD, 16,630 ft MD, and 4,720 ft HL, and well configurations appear to be converging, due in part to the identification of geographic sweet spots and learning in completion design.

Operators design the lateral length of wells based on the characteristics of the formation and stimulation requirements. Long lateral length increases exposure to the formation and production potential but also costs more to drill and increases the risk of encountering a geohazard and initiating fracs at the well toe.

Production activity

Producing wells

In March 2013, a total of 2,248 Haynesville wells were producing.

The number of new producing wells follows drilling and completion trends delayed by 3-12 months (Fig. 7). Single-well lease unit wells (LUWs) report production from one well while multiwell LUWs aggregate production from two or more wells.

From 2007 through 2012, a total of 1,434 single-well LUWs and 220 multiple-well LUWs started production (Table 2). On average, there are about four wells per multiwell LUW, and through 2012 a total of 814 wells on multiwell LUWs produced.

LUW production

The majority of Haynesville production arises from single-well LUWs.

In March 2013, there were almost twice as many producing single-well LUWs as wells on multiwell LUWs (1,484 vs. 814). If wells have approximately the same productivity and are brought online in the same proportion and rate, we would expect single-well LUWs to contribute about two-thirds of Haynesville production which is consistent with observation (Fig. 8).

At the end of 2012, single-well LUW cumulative production totaled 3.6 tcf; multiwell LUW cumulative production totaled 2.2 tcf.

Type curves

In 2008, the average Haynesville well brought online produced at an initial rate slightly less than 5 MMcfd, and after a year was producing at 1 MMcfd, (Fig. 9).

Type curves aggregate all wells drilled during the year and do not distinguish according to lateral length, location, completion strategy, etc.

Initial production rates for wells brought online in 2009 and 2010 improved on average to 8.3 MMcfd, but steep decline was still evident, with first-year rates dropping about 70% to 60-90 MMcf/month. In 2011-2012, initial production rates for wells brought on-line dropped to 200 MMcf/month, but first-year decline rates improved to 53%.

Production factors

Many factors contribute to unconventional well production, including the depth, thickness, and lateral extent of the shale; organic richness; thermal maturation; permeability and pore pressure; stimulation design and success; and operational practices.

Degradation of the fracture network is one of the most important factors impacting production rates, and preventing this degradation is challenging in highly pressured formations like the Haynesville with soft rock and low Young's Modulus, as proppant embedment and proppant crushing may occur.

Operators experiment with completion strategies to configure the well in an optimal manner, but there is no guarantee that configurations will remain optimal as different areas of the formation are explored. High performance risk in areas outside core areas constrains the amount of capital invested in development plans.

Average recoveries

Average production profiles have improved over time, and during the first 5 years of production, average recovery volumes have increased from 1.8 bcf/well in 2008 to 5.5 bcf/well in 2012 (Fig. 10).

Most wells recover 30-40% of their expected ultimate recovery (EUR) during the first year of production and 40-50% of EUR during the first 2 years. Tail volumes produced after the fifth year are small and range between 5% and 15% of EUR.

Expected ultimate recovery

Stimulated reservoir volume

The goal of fracturing is to maximize the amount of stimulated reservoir volume achieved across the lateral, but the science is inexact and varies with formation characteristics, requiring operators to experiment to obtain the best results.

High pump rates, small and lighter proppant, higher concentrations per cluster, and fewer perforations tend to generate larger half-length fractures and lead to greater stimulated reservoir volumes. Flowing back wells less aggressively in early production may also play a role in reduced decline rates and increase in recovery.

High initial production and fast decline rates reflect a large number of small fractures near the wellbore, whereas newer completions with lower initial production rates and shallower decline curves are likely due to greater half-lengths.

Vintage and lease type

Single-well LUWs completed in the Haynesville in 2008 are expected to yield an average of 2.3 bcf/well, and for those wells completed in 2009-2011, 4.0-5.7 bcf/well (Table 3).

Multiple-well LUWs yield higher average recovery volumes, ranging from 3.1 bcf/well in 2008 to 6.2-7.4 bcf/well in 2009-2011.

In 2012, average EURs are predicted to be 6.4 bcf/well for single-well LUWs and 9.2 bcf/well for multiwell LUWs, but the limited production history from which the recovery volumes are evaluated may bias the estimates.

Average EUR per wellbore of wells drilled through the first quarter of 2013 is 5.2 bcf/well for single-well LUWs and 7.4 bcf/well for multiwell LUWs. Across all years and lease types, standard deviations are high and on the order of the mean, 4 bcf/well for single-well LUWs and 5.1 bcf/well for multiwell LUWs, indicating significant variability across wells and performance risk.

Total volume

Total recovery for the 2,248 producing Haynesville wells circa March 2013 is estimated as 7.5 tcf for single-well LUWs, 6.0 tcf for multiwell LUWs, and 370 bcf for wells with production histories of less than 5 months at the time of the evaluation (Table 3). Total expected recovery from all producing wells in the Haynesville shale circa March 2013 is estimated to be 13.9 tcf.

EUR distribution

Single-well and multiwell EUR distributions are broadly similar, but multiwell LUWs generally dominate, presumably because of better prospectivity and learning in drilling and completion design (Fig. 11). Most wells are expected to produce 2.5-5.0 bcf/well, and about two-thirds of wells are bound between 2.5 and 10.0 bcf/well.

About 10% of single-well LUWs have EURs greater than 10 bcf/well compared to about 25% of wells on multiwell LUWs. Conversely, about 25% of single-well LUWs realize EUR less than 2.5 bcf/well compared to 10% for multiple-well LUWs.

Normalized EUR

Lateral length is an important variable in creating the stimulated reservoir volume.

Expected recovery volumes normalized by horizontal distance and perforated length have improved over time for both single-well and multiple-well LUWs (Table 4).

In 2008, EUR per horizontal distance for single-well LUWs was 0.7 MMcf/ft; in 2012, EUR/HD = 1.3 MMcf/ft. In 2008, EUR per perforated length was 1.0 MMcf/ft; in 2012, EUR/PL = 1.5 MMcf/ft.

The Authors

Mark J. Kaiser ([email protected]) is professor and director, research and development, at the Center for Energy Studies at Louisiana State University. His primary research interests are related to policy issues, modeling, and econometric studies in the energy industry. Kaiser holds a PhD from Purdue University.

Yunke Yu is a research associate at the Center for Energy Studies at LSU. His research interests are related to modeling and economic evaluation. He earned a bachelor of engineering in oil and gas transportation and storage from China University of Petroleum and a master of finance from Tulane University.