Haynesville Shale land grab could spur deals
NEW YORK (Reuters) - Looking to get into the Haynesville Shale? Your best bet might be to buy a company.
Companies with assets in the red-hot natural gas discovery in west Louisiana could soon be in play as oil and gas companies look to gain access to what could be the next big unconventional gas play in North America.
The fervor surrounding the shale could also drive consolidation among the companies already there.
"I think there will be consolidation," said Ken Kenworthy, chief executive of GMX Resources Inc (GMXR.O) -- one of the companies investors and analysts said could be up for grabs.
"There's about 30 players of substance in the play, but there's a lot of players that aren't there that will want to get in ... I think there's going to be a lot more activity in the future," he said.
"Haynesville" has become a buzz-word in energy circles, causing companies' stocks to soar with every announcement of new acreage there on high expectations about the size of the natural deposit there.
Chesapeake Energy Corp's (CHK.N) Chief Executive Aubrey McClendon has said the shale could hold 20 trillion cubic feet equivalent of gas reserves -- around as much gas the United States used last year.
Besides GMX, companies that could be attractive takeover targets include EXCO Resources Inc (XCO.N), Petrohawk Energy Corp (HK.N), and Goodrich Petroleum Corp. (GDP.N), according to investors and analysts.
GMX Resources' Kenworthy said his company is not actively courting buyers and plans to develop its Haynesville assets on its own. Still, he acknowledged that the company has received expressions of interest from suitors in the past.
A Petrohawk spokeswoman declined to comment on the possibility sale, and the other companies could not be reached for comment.
DRILLING DIFFICULT, PRICEY
Drilling in a shale formation, where the gas is locked tightly in rock, is more complex than conventional drilling. Technology like hydraulic fracturing and horizontal drilling is needed to break up the shale and release the gas.
Moreover, wells in the Haynesville Shale require nearly two times the drilling and fracturing intensity as wells in the better understood and more developed Barnett Shale in north Texas.
"It's not a technically easy play," said Lewis Ropp, equity analyst at Barrow, Hanley, Mewhinney & Strauss. "A lot of the smaller companies are looking for partners that can bring technical expertise as well as new capital into the play."
Wells in the Haynesville Shale cost between $7.5 million and $8 million to drill a piece, nearly double the cost of comparable wells in the Barnett Shale, according to Gary Bradshaw, senior vice president at Hodges Capital Management. Continued...
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