Updated September 25, 2023
Recent News:
|
|
Price | |
August 25, 2023 - Haynesville producers have often been exposed to Columbia Gulf Mainline (CGM) basis as the gas they produce is sometimes sent east toward the Perryville Hub. Columbia Gulf sources gas in Appalachia and sends it south into Louisiana, passing through Perryville. This means Haynesville gas competes with supply from Marcellus. NGPL-TxOK basis has traded between -$0.40 and -$0.60 YTD as additional pipeline capacity in Haynesville has alleviated some constraints. The threat of too much production finding enough egress has dissipated. Haynessvile basis should be under less pressure going forward as the rate of production growth moderates, due to the price pull-back, and new pipelines come online. This current outlook is much different from the beginning of the year when Nymex gas was priced much higher, which incentivized operators to grow. |
|
|
|
|
|
|
|
Haynesville Shale Overview
|
|
The Haynesville Shale lies underneath parts of northwest Louisiana, East Texas, and southwest Arkansas. The shale is at depths of 10,500 to 13,000 feet below the surface and covers about 9,000 square miles. The formation came into prominence in 2008 as a major shale gas play. |
|
The map shows both Columbia Gulf Mainline (CGM) (red) and NGPL (orange) pipelines. Highlighted sections of the pipelines represent where pricing takes place for both CGM and NGPL-TxOk, according to Platts methodology Source: AEGIS, PointLogic, Platts |
|
Rig Count |
|
Active rigs in Haynesville soared in 2022 but retreated in 2023 due to lower gas prices. Increased public company and M&A interest in the gas play pushed rigs to the highest level since 2012. Lower Nymex gas prices have forced operators in the region to rethink development plans and reduce activity. |
|
Haynesville Rig count from the U.S. Department of Energy (monthly)
|
|
Production: The weak supply-demand balance, and moslty bearish weather, in the Lower 48 gas market have led to a well-supplied gas market. Haynesville rig counts were at 39 as of September 25, 2023. Active rigs in the region were at 70 this time last year, representing a 41% decrease year-over-year. According to PointLogic, modeled dry gas production for Haynesville is near 14.93 Bcf/d as of late-September. By 2025, Haynesville dry gas is expected to grow 3.1 Bcf/d. |
|
|
|
Expectation of constraints. Cheaper basis prices, or large discounts to Henry Hub, usually imply some sort of egress capacity constraint or increased need for capacity out of the basin. Haynesville basis has greatly improved and been rather stable as Henry Hub prices have fallen, reducing drilling activity. The price decline in Hub has provided the region with breathing room where supply growth is paused or moderated as new infrastructure projects come into service Energy Transfer announced on December 15, 2022, that the 1.65 Bcf/d Gulf Run pipeline is in service. The 135-mile, 42-inch pipeline transports gas from Louisiana's Haynesville to the Gulf Coast. It is supported by a 20-year agreement with the $10 billion Golden Pass LNG export plant being built in Texas by Exxon Mobil and Qatar Energy. Enterprise Products Partners has announced that it has expanded its Acadian pipeline system in Haynesville by 0.400 Bcf/d to 2.5 Bcf/d. The company added that additional takeaway capacity is needed to meet increasing industrial demand in the Mississippi River corridor and LNG export growth DT Midstream Inc. announced a final investment decision (FID) on its Louisiana Energy Access Project (LEAP) Expansion Phase 1 on February 25. It adds an incremental capacity of 0.300 Bcf/d and is slated for service in 4Q2023. DT Midstream Inc. announced a final investment decision (FID) on its Louisiana Energy Access Project (LEAP) Expansion Phase 2 on August 3. It adds an incremental capacity of 0.400 Bcf/d and is slated for service in 1Q2024. Williams announced a final investment decision (FID) on its Louisiana Energy Gateway Project on June 29. It transports 1.8 Bcf/d of natural gas from the Haynesville shale basin to several Gulf Coast markets, including its Transco gas pipe from Texas to the U.S. Northeast and LNG export plants. The pipeline is expected to be in service in 4Q2024. DT Midstream Inc. announced a final investment decision (FID) on its Louisiana Energy Access Project (LEAP) Expansion Phase 3 on October 28. It adds an incremental capacity of 0.200 Bcf/d and is slated for service in 3Q2024. |
|
Hedging considerations CGM and NGPL-TxOk basis can be hedged with swaps. The basis is usually hedged as part of a complete natural gas hedge. The general recommendation is to hedge NYMEX Henry Hub natural gas and basis in two steps, but simultaneously. Contact us at info@aegis-hedging.com if you need to work through the details. |