top of page
  • Clear Fork Royalty

East Texas Oil and Gas Coming Back Strong

Updated: Apr 12, 2019

Red Oil Well in East Texas

It was only a decade ago that the existence of significant natural gas deposits was confirmed in the Haynesville formation. The gas-rich shale is found in parts of East Texas, southwest Arkansas and western Louisiana, and it runs to depths of 15,000 feet. Reserve estimates run from 300 to as much as 500 trillion cubic feet, in part because the formation "is very deep and very thick."

Just to the north of the Haynesville Shale play is the Cotton Valley formation, which runs at depths of about 7,800 to 10,000 feet. Cotton Valley extends from northeast Texas to northwest Louisiana.

After its discovery, Haynesville Shale quickly emerged as one of the nation's top new sources of natural gas. However, as oil prices surged to more than $100/bbl, companies were more attracted to wet wells in other regions. Interest waned in the dry deposits in Haynesville Shale where natural gas is the primary resource.

Reemergence of Haynesville Shale

However, when oil prices dropped by half and more, companies refocused on Haynesville's rich natural gas deposits. Today, the Haynesville shale play is more viable than ever. Drilling activity has increased, so much so that Forbes referred to the "reemergence" of Haynesville natural gas, and others have described how the Haynesville shale play is being "reborn."

New and more efficient technology reinvigorated production. World Oil magazine noted a Haynesville case study in which refracturing increased output by immediately 700 percent while sustaining 400 percent higher production for three months. Since Haynesville's natural gas deposits are some of the deepest in the country, the relatively high-porosity shale stands to gain that much more from advanced hydraulic fracturing and directional drilling methods.

In 2016, Chesapeake Energy announced that, in partnership with the Williams Companies, it would add 140 new Haynesville wells. One analyst estimates that 3,000 wells have been drilled in the formation thus far, with a cumulative 20,000-well potential over the next 25 years.

Rig counts, which reflect exploration and development, have increased significantly. Although oil and gas activity has increased nationwide, expansion is greater still in the Haynesville Shale formation. During the past year, the U.S. rig count has increased by more than 30 percent, from 597 to 929. During the same period, the number of Haynesville Shale rigs has soared from 26 to 43 during the same period, an increase of more than 60 percent.

In 2017 alone, natural gas production increased more than 20 percent. The Haynesville Shale now accounts for 13 percent of U.S. shale gas production. The EIA reports that Haynesville is now the third-largest producer of domestic natural gas, trailing only the Marcellus (Ohio, Pennsylvania and New York) and Permian (West Texas) plays.

Global Demand Supports Increased Supplies

Natural gas is one of this nation's energy success stories. Thanks in part to a boost from deposits in shale formations, domestic production meets 97 percent of U.S. demand, according to the Energy Information Association (EIA). Texas accounts for 24 percent of domestic natural gas production.

Is there a concern that meeting domestic needs will reduce demand? Not at all, thanks to the potential for liquefied natural gas (LNG) exports. Liquefying the fuel reduces volume by 600 times, making it far easier to transport around the world. New LNG export terminals are coming online, and more are under construction. Fortunately, many of these LNG production facilities are relatively close to the Haynesville formation. The one LNG facility currently in operation at Sabine Pass will ultimately have a capacity of 3.5 billion cubic feet.

An article published by the Institute for Energy Research noted that a number of additional LNG projects are scheduled to go online in 2018-19. These new projects will further increase the country's LNG export capacity to more than 10 billion cubic feet. With the exception of a Cove Point, Maryland, terminal and a smaller project in Georgia, all the other new facilities will be in Texas and Louisiana. The EIA projects that LNG exports will continue to expand, quadrupling from 2018 to 2035.

Infrastructure in the form of rail lines and pipelines facilitates economical transport of Haynesville Shale natural gas to nearby industrial markets and LNG terminals.

There are other reasons why the future bodes well for the Haynesville Shale play. First, thanks to a long history of Texas oil and natural gas production, the culture is more amenable to the Haynesville Shale play than development efforts in Ohio and Pennsylvania. Second, long-term domestic and foreign demand for U.S. natural gas looks very good. Major U.S. industrial plants and power plants look to natural gas as a relatively "green" alternative to coal and oil. Demand for U.S. LNG exports will strengthen, particularly as East Asian countries look to the clean, cost-effective fuel to fuel expanding economies.

Offers for Mineral Rights and Royalties

The Haynesville Shale play represents a significant opportunity for those with mineral rights and royalties, including those who may have inherited such assets. By selling mineral rights and royalties to Clear Fork Royalty, owners can secure a more predictable financial future.

Whether you need cash or increased liquidity, or you just want the peace of mind that comes from letting someone else assume the risks associated with fluctuating commodity prices, count on Clear Fork Royalty to make a fair and prompt lump-sum offer for some or all of your mineral rights or royalties. Contact Clear Fork Royalty today for a prompt, professional evaluation of your holdings. Our proprietary royalty acquisition system allows for a quicker evaluation of royalty holdings -- many times in just hours or days.

Clear Fork Royalty is currently interested in Haynesville Shale royalties in Harrison County, Panola County, Rusk County, Gregg County, Smith County, Shelby County, San Augustine County, Angelina County, and Nacogdoches County, Texas.

213 views0 comments


bottom of page