Haynesville Shale Play
Where the Growth Is in Natural Gas Production
Editor's note: For more updated information from Keith Kohl on Shale Gas Stocks, click here...
In our haste to make it to Fort McMurray, I had left my coat hanging neatly on its hook at home.
Fortunately for us, The weather was beautiful throughout the entire trip. Had we left in January (rather than September), the outcome would have been quite different. In an area where the lows can easily reach -40o during the winter, my shorts simply wouldn't do.
Believe me, it's something that won't be overlooked in the future. So why were my thoughts dwelling on a trip I took over a year ago?
After fifty-five consecutive hours of driving, my cohort casually remarked how we should just stay and find a job nearby. Part of me agreed.
After crossing the border into Saskatchewan, nearly everyone we talked to said that people were flocking to the oil sands for employment. The six-figure salaries immediately drew our attention. By the end of the trip, there was one fact that neither of us could deny: Fort McMurray was absolutely booming.
There was a very specific reason my mind was thinking back to that trip...
The Haynesville Shale Play
Not too long ago, I read how the Barnett shale was responsible for 80,000 new jobs and adding billions of dollars to the gross economy. I can't help comparing this with what I saw in Alberta and how one resource play had such an affect on the surrounding area.
But there's another shale name you might want to get used to.
I'm sure my regular readers have heard a thing or two about Haynesville shale. Approximately two miles underground and 170 million years old is a rock formation that has been hailed in as the largest natural gas field in the U.S.
Watching how the Barnett grew, I can't help but see the Haynesville shale head in a similar direction.
Now, I'm not going to speculate on which formation is the largest, either way we're talking about a lot of natural gas-almost 250 trillion cubic feet of it that is considered recoverable. Despite activity slowing down due to the recession, my outlook for the Haynesville hasn't wavered.
Let's take a step back for just a second and look at the bigger picture.
U.S. Natural Gas Outlook
We already know that U.S. natural gas production is growing substantially. In the Energy Information Administration's latest Short-Term Energy Outlook, our natural gas production is expected to increase by 6% this year.
The interesting part, however, is where the production growth is occurring.
As you know, the main cause for this jump is from unconventional fields, particularly in Texas, Wyoming and Oklahoma. In fact, production in the lower-48 states (not including the Gulf of Mexico) is expected to increase by 10%
Compare that to the Federal Gulf of Mexico production. This past hurricane season took a toll on infrastructure, causing a 14.8% decline in 2008. Production growth in 2009 is expected to be 2.9% as those repairs continue.
It's those unconventional areas like the Haynesville and Marcellus shales that are going to be hot spots for producers
Stick with the Drillers
For investors, I can only imagine the beating that some of your portfolios have taken.
Trust me, you aren't alone.
However, the only difference between you and the herd, however, is whether you follow their panic-selling. Once we dig ourselves out of this recession, a lot of investors will be slapping their foreheads in regret.
Personally, I would stick with those oversold stocks that will bring this new production to market. I know this has been a recurring theme with my readers lately, but my view haven't changed in the slightest.
One company worth checking out is Petrohawk Energy (NYSE: HK). Not only does Petrohawk have approximately 300,000 acres in the Haynesville, but some of their wells are producing up to 15 million cubic feet per day.
Although my expectations are high for shale plays like the Haynesville formation, there are some investment pitfalls in natural gas. The largest one of which may end up costing you a fortune if you're not careful. Next week, I'll tell you exactly which natural gas play to avoid like the plague.
Until next time,
Energy and Capital
P.S. Once we come out of this economic slowdown, there's going to be a wealth of under-priced stocks begging to be picked up at a discount. Your fellow Energy and Capital readers have had enormous success finding these small, under-priced natural gas gems. It's only fair if I offer you the same chances that they have had. You can learn more about the $20 Trillion by clicking here.
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