The Daley Note: November 17, 2023
Where do you go when you need an extra kick to your gas supply? Haynesville producers have raised their output in November, defying rig trends and East Daley Analytics’ ArkLaTex Basin forecast.
Pipeline flows in the Haynesville shale are off to a strong start this month. Samples in Louisiana and East Texas have averaged 13.2 Bcf/d through November 16, up ~300 MMcf/d over October and the highest volumes East Daley has observed since the basin sample peaked at 13.7 Bcf/d in May 2023 (see chart).
Most of the gains have shown up on Energy Transfer’s (ET) Enable - Haynesville gathering system (+275 MMcf/d). Williams’ (WMB) Louisiana/Magnolia system has actually seen flows decline by -206 MMcf/d M-o-M so far, offset by small gains on several other gathering systems.
Record LNG feedgas demand to the south could be responsible for some of the increase in flows. Venture Global’s Calcasieu Pass LNG recently has received record-high volumes near 1.8 Bcf/d, and could have commitments leading to the growth.
Some producers may also have hedges tied to deliveries in November 2023, the start of the 2023-24 heating season. Henry Hub futures have consistently traded over $3/MMBtu this year for the winter months, and contracts were priced over $4 at the start of 2023. Producers with favorable hedges may bringing on new wells to meet commitments and increasing overall supply.
EDA has been calling for production declines in the Haynesville since July. Our latest ArkLaTex Supply and Demand Forecast predicts wellhead gas production to fall to 17.5 Bcf/d by YE23 from the peak of 18.7 Bcf/d in May 2023.
Rig counts in the Haynesville averaged 53 in October, down from 75 rigs at the start of the year. The ArkLaTex forecast expects production to continue declining through July 2024, with significant rig adds starting in May 2024 as gas prices turn around.
Leading Haynesville producers are guiding to a similar outlook. On the company’s 3Q23 earnings call, Southwestern Energy (SWN) executives said they expect overall Haynesville production to decline “at least into early next year,” and that “strip prices are not yet high enough to incentivize production growth.”
Chesapeake Energy (CHK) guided to a steady drilling program of 5 rigs in the Haynesville, with the option to add a rig in the back half of 2024 if prices improve from new LNG demand. Comstock Resources (CRK) has also guided to a flat rig program. CRK is focused on developing its Western Haynesville acreage in Texas, where 2 rigs are currently drilling. CRK plans to add a rig to that acreage in 2024 and another in 2025, keeping the producer’s overall basin rig count at 7. – Oren Pilant Tickers: CHK, CRK, ET, SWN, WMB.
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