Updated October 31, 2024
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October 31, 2024 - Prompt Columbia Gulf Mainline basis rebounded from a year-to-date low of around -$0.40/MMBtu in early June, traded higher, and then finished higher in October. Prices have been trading sideways so far in November. Basis prices have fallen sharply over the past few months despite a reduction in Haynesville supply of more than 1 Bcf/d, but production appears to be rising again from the June trough of 13.6 Bcf/d to 15 Bcf/d as of October 8. Takeaway capacity from the region is expected to remain open with several new pipes on the way, reducing the probability of large blowouts in price. 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. |
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Haynesville Shale Overview
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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. |
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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 |
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Rig Count |
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Active rigs in Haynesville soared in 2022 but retreated in 2023 and 2024 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. |
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Haynesville Rig count from the U.S. Department of Energy (monthly)
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Production: According to data from S&P, supply has fallen in 2024 from just under 16 Bcf/d to a low of 13.5 Bcf/d, but as of October 8 is back up to 15 Bcf/d. Rigs are also down year-over-year to 34 in early October. Production is expected to continue growing as the Haynesville will be one of the main supply sources for new LNG export facilities. |
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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 expected to be in service in January 2024. Williams announced a final investment decision (FID) on its Louisiana Energy Gateway Project on June 29, 2023. 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's in-service date has been pushed from 4Q 2024 to 2H 2025 amid ongoing legal challenges with Energy Transfer over easement crossings. 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 was slated for service in 3Q2024. DT Midstream completed the LEAP Phase 3 Expansion ahead of schedule and within budget, increasing capacity to 1.9 Bcf/d. They are now evaluating a Phase 4 expansion for 2025-2026, targeting an additional 0.2-0.4 Bcf/d, which could ultimately grow the system to a total capacity of 4 Bcf/d. |
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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. |