HAYNESVILLE RIGS SET TO DECLINE

The large public natural gas producers in the Haynesville basin have said in their analyst conference calls and presentations that they will be reducing the number of rigs that they are utilizing in 2023.  The rig count reductions are expected to begin in March 2023 and will slowly continue until the 3^rd quarter of 2023 according to the guidance reports.  Rigs in the Haynesville basin are currently at 77, up from 70 rigs exactly a year ago.  However, beginning in mid to late March of 2023 until the end of the 2^nd quarter of 2023, the Haynesville basin should see reductions of at least 5 rigs from the large public producers and probably see an additional 5 rig drop from the private producers.  Real-time rig count data is provided by Hyperion by sub-Region and by individual producer.

Chesapeake Energy

Chesapeake Energy said that they will be dropping a total of 3 rigs in 2023 compared to 2022.  They will be dropping 2 rigs in the Haynesville and 1 rig in the Northeast Marcellus.  The first rig is expected to be dropped in March 2023 in the Haynesville along with the other rig sometime during the 3^rd quarter of 2023.  Chesapeake Energy is also expected to drop 2 frac crews sometime in 2023 based on their guidance.  Chesapeake also stated that they are now seeing signs of Haynesville producers cutting back in the region due to much lower pricing.  Chesapeake expects to see operators cutting back further in the Haynesville region.  Chesapeake expects their average lateral length to increase by 7% in 2023 compared to 2022.

Comstock Resources

Comstock also made the call to drop 2 rigs in the Haynesville basin in 2023 compared to 2022.  Comstock will also focus more of its attention and activity to the Bossier region in the Western Haynesville where they have found wells with an astounding 42 MMcf/d IP (Initial Production) rate.  Comstock is dropping 2 rigs due to much lower natural gas pricing.  Comstock will not be dropping any rigs in the Western Haynesville.  Comstock also plans to draw down on its DUCs in 2023.  Comstock believes the sell-off in natural gas has been over done and they remain bullish in the long run for natural gas.  Comstock will retain 3 frac fleets in 2023, which is the same as it was in 2022.  Comstock’s average lateral lengths will increase 10% in 2023 compared to 2022.

Southwestern Energy

Southwestern Energy also said that they will be dropping 2 rigs in 2023, with one rig dropping in the Haynesville basin and the other rig dropping in the Northeast Marcellus basin.  Southwestern also confirmed that they are seeing other producers preparing to cut back on rigs in the Haynesville basin.  Southwestern Energy’s rig drops will begin in late March 2023 with one rig drop in the Haynesville basin, then the other rig in the Marcellus basin will be dropped sometime in the 2^nd quarter of 2023.  Southwestern Energy expects their lateral lines to increase by around 10% in 2023 to an average of 10,000 lateral feet.  Southwestern also expects to improve cycle times in 2023 by 10% in the Haynesville basin.  

Antero Resources

Antero Resources, a Northeast natural gas producer, stated that the breakeven price of natural gas in the Haynesville basin is above current pricing levels on the NYMEX Henry Hub natural gas market.  Antero Resources says that the breakeven price of natural gas is between $3.06 and $3.77 per MMBtu in the Haynesville basin.  NYMEX Henry Hub natural gas prices are currently trading at $2.71 per MMBtu for the April-2023 futures contract.

Antero Resources also said that breakeven prices for the Northeast natural gas market is between $2.32 and $3.02 per MMBtu.  Dominion South natural gas prices for next day delivery are currently trading around $2.23 per MMBtu.

Summary

Rigs in the Haynesville basin are expected to drop based on what the large public producers are now saying on their production guidance and from what the large public producers are saying about the rest of the producers in the region.  Prices significantly below $3 per MMBtu at the Henry Hub typically result in significant declines in rig counts in the Haynesville basin.