The advancement of hydraulic fracturing technology was what lead the U.S. to become a major oil and gas producer in recent years.
However, as bigger, easier-to-extract sources of natural gas were found, the Haynesville shale play — which stretches between Louisiana and Texas — fell by the wayside.
You see, the Haynesville play holds the second-largest natural gas reserves in the U.S., after only the Marcellus shale play in the north. Unfortunately, by 2009 much of that supply was too deep and too expensive to extract.
In turn, a lot of companies vacated the play in search of more economical sources…. but not everyone.
Enter Comstock (NYSE:CRK): one of the companies that stayed to drill only a few wells p
er year in the Haynesville play. This company has recently asserted that the previously unreachable resources are now more affordable, and it intends to start drilling soon.
Comstock has claimed that it can get a 30% return on new wells, even with natural gas prices at only $2.50 per million British thermal units. This is akin to oil companies who have stayed profitable at prices that have dropped below $40 this year.
The company expects to drill more wells in the Haynesville play this year than it will in even the plentiful Eagle Ford shale play.
U.S. natural gas consumption has risen 2.4% annually for the past 10 years. Recently, it has been driven swiftly upward by the clean energy movement, including President Obama’s Clean Power Plan. These factors have also reduced coal demand by 2.7% and oil demand by 0.7% in the same time.
In April of 2015, natural gas beat out coal in U.S. energy production, reaching 31% to coal’s 30%. Natural gas still averages about 30% of the U.S. energy portfolio, and that number is only expected to increase as more coal is phased out.
Comstock is poised to make major gains from this growing demand. The company’s aggressive use of hydraulic fracturing, using more sand and chemicals and expanding wells deeper into the shale, will bring higher production and higher profits.
“This is a brilliant example of how the cost of supply continues to come down,” said research director at Wood Mackenzie Robert Clarke.
Even in the low-price environment oil and gas are in right now, it seems the technology that made the U.S. an energy giant is still advancing.
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Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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