In March, Chesapeak Energy announced the shale — estimating the field had as much as 20 trillion cubic feet of natural gas. That would put it at four times the size of the gas field around Fort Worth known as the Barnett shale — one of the biggest in the world.

A year ago, oil companies paid less than $250 an acre for the leasing rights to drill. Now, property owners are getting $20,000 an acre and as much as 30% of what a well brings in — three times what it was a few months ago.

Visit our new site: Haynesville Shale News

Many predictions have the Haynesville Shale being bigger, much bigger, than the Barnett Shale. So, put away your crystal ball and gaze west to Fort Worth and beyond to see what’s happened in the Barnett as the best predictor of what’s to come in the Haynesville Shale. Some handy links:

Fort Worth Star Telegram’s Barnett Shale Blog

Ask Chesapeake

What’s your prediction? Hype or Boom for the Haynesville? Leave a comment.

HOUSTON (Reuters) – A company news release with the words “Haynesville Shale” these days is enough to send an exploration and production stock soaring, but with little known about the Louisiana natural gas discovery, some question whether the talk justifies the gains.

In March, Chesapeake Energy Corp CEO Aubrey McClendon said Haynesville may hold an eye-popping 20 trillion cubic feet equivalent of potential reserves — nearly equal to the amount of gas consumed in the United States last year.

Since then shares of smaller companies that hold acreage in the shale have “gone through the roof,” said Jeff Hayden, senior analyst at Pritchard Capital Partners LLC.

“I’ve never seen stuff go this crazy on this few hard data points, but that’s kind of the market we’re in,” Hayden said. “Everybody is looking for the next play and nobody wants to miss it.”

Yet there is little public data about the Haynesville Shale, a formation in northern Louisiana near Shreveport where natural gas is trapped underground in sedimentary rock. Exploration and production require sophisticated technology, an investment made more enticing by the year’s soaring energy prices.

“The more capital I see put in Haynesville, the better I feel about the play, but that doesn’t mean there’s too much froth,” Phil Weiss, energy analyst at Argus Research, said. Drilling there is becoming more active, a sign that exploration is beginning in earnest, Weiss said. Chesapeake Energy has already locked up the rights to drill on 500,000 acres in the Haynesville Shale and was the first large company to publicly discuss the discovery’s potential.

REVERBERATIONS
The reverberations, however, are still being felt.

GMX Resources, for example, said on Tuesday it had purchased more property in the Haynesville, bringing its total acreage to 27,500 acres in the Haynesville and Bossier shales in east Texas and northern Louisiana.

The news pushed its shares to an intraday lifetime high of $71.99 on Thursday. Since the start of the year, the stock is up nearly 118 percent.

Shares of Goodrich Petroleum Corp have risen 135 percent since the first Chesapeake announcement, while Chesapeake’s shares have climbed 42 percent in that period. Comstock Resources Inc is up 102 percent, and Petrohawk Energy Corp  has soared 108 percent. And most stocks are trading at or near all-time highs.

Those gains compare with a 25 percent rise in the Dow Jones U.S. Exploration and Production Index .DJUSOS during the same time period.Other companies with exposure in the Haynesville include EnCana Corp, Forest Oil Corp and EXCO Resources Inc.

Some analysts question whether investors have gotten ahead of themselves. In years past, investors wanted to see more hard data on a field’s potential before aggressively buying stocks that have exposure in a developing area, Hayden said.

Valuations are also rich, another sign that might signal these stocks may be topping out, analysts said. Shares of Chesapeake are trading at about 16 times 2009 earnings, above the Standard & Poor’s index of natural gas producers .XNG, which is trading at 15 times 2009 earnings.

Goodrich Petroleum is trading at about 89 times 2009 earnings, according to data from Reuters Estimates.

“HIGH SIDE”
“Chesapeake’s valuation is on the high side right now,” said Argus Research’s Weiss. “I know Chesapeake is getting close to where it has topped out, in my view, for now.”But Pritchard Capital’s Hayden and other analysts said there is plenty more upside in the stocks if the Haynesville discoveries pan out.

“This really comes down to how good you think the play is,” Hayden said. “There aren’t a whole lot of data points, but there is plenty of chatter about the type of production rates people are seeing and they sound pretty good to us.”

And Argus Research’s Weiss said Chesapeake’s public comments about the Haynesville Shale’s potential help confirm that there is value in the play.

The frenzy to own Haynesville Shale stocks can be traced to investors’ desire to capitalize on the booming energy sector, which is outperforming the broader market, said John Olson, hedge fund manager at Houston Energy Partners.

“The market has actually jumped way ahead of the drilling activity, Olson said. “What this play has is tremendous novelty value, but sooner or later it is going to cool off, and these stocks will obey the laws of gravity.”

By Ginger Ramsey / gramsey@gannett.com

Southwood High’s flagline was practicing on the corridor in front of the school’s office as hundreds of Southern Hills residents filtered into the auditorium for a Haynesville Shale 101 meeting June 17.

The informational meeting was held after Southern Hills Home Association President Pat Spigener said, “In the past couple of weeks, I have had many requests by homeowners to know more about the recent issue of Haynesville Shale. The homeowners association has responded to your requests.”

SHHA members welcomed visitors and directed them to tables where they could sign in to receive additional homeowner information and an informational brochure from the mayor’s office before searching for a seat. “There were well over 650 names signed in,” Spigener said.

Southwood High assistant principal Jeff Davis helped the audience find seats and line up against the walls as people poured in from the south parking lot before making the final assessment, which closed the meeting due to overcrowding.

Those turned away were invited to attend other meetings June 19 at a nearby church and June 21 at the Convention Center. “It really was a great turnout. I didn’t know there was a fairly large amount of people turned away,” said Spigener. “I think that shows the interest in the Haynesville Shale development.”

Spigener instructed the audience the evening meeting was for information only, to help residents make more informed decisions about their situations. She then turned the floor over to Tom Dark, the city’s chief administrative officer, and Walter Johnson, a local attorney, who spoke to the packed auditorium for about an hour then took individual questions from audience members.

Dark, a Southern Hills native whose father still lives in the area, said, “I was so happy when they called to see if I could do one here. This is my second meeting in a school auditorium, and it is the same result. It is rare to have this many people who come to see you and want to,” he quipped.

Citing a case in Texas, Dark said an entire apartment complex was bought, then leveled and a well built on the property. “There may be hope for the old Albertson’s building yet,” he said to chuckles in the audience.

“The hoopla is real,” he said, but continued, “It is also possible that all geologists are wrong and the holes are not as profitable.

“The city is here to provide reasonable, unbiased information.”

He cautioned citizens by reminding them, “a lease is a contract, and most of that contract is not about how you are going to get paid.” He then advised them to not simply focus on potential gain but to approach the offers in the same manner as if someone walked up and said, ‘Let’s start a business together.’

“I would ask those of you with 10 acres or more to stand up, but then the landmen in the room, and there are a few, would come sit next to you,” Dark said as the audience laughed.

He offered this advice, some from common sense and some from the advice city officials sought from Fort. Worth, Texas, officials with experience in the Barnett Shale. If they don’t tell you who they work for, you need to find out. You need to sign with somebody who you thinks has the possibility to drill on your land and develop your minerals. Find out how long the lease is for. In general, shorter is better. They are going to want five years, it is better to offer them three years and be sure to check on a renewal clause.

Dark said the philosophy from the Fort. Worth crew was, “if you don’t need the money, don’t lease it now because it will go up.” He reminded the audience that while that ended up being true of the Barnett Shale field, the Haynesville Shale is an unproved ground as yet. It is entirely possible the test wells are the biggest wells.

“Fort Worth is a proven field,” he said. “That’s not where we are at.”

Dark also spoke of what the audience could do as individuals, mostly by doing some research about their properties, learning the terms associated with the industry and leasing process and looking out for the elderly and other neighbors who might be perceived as easily preyed upon.

“Now is the time to stick your nose in their business,” Dark said. “You don’t have to stick it far,” he added.

Not every piece of property with gas will be economically feasible to develop and may not be considered. “Natural gas doesn’t magically get to market. It takes pipelines and central collection points,” he said. Dark also stressed that although city officials are out educating the public, “the city does not regulate this” because gas wells are an industrial activity. “It is noisy and dusty, but it is not forever,” he said.

Dark made sure to stress the importance of fiscal responsibility and level-headedness. First, “Uncle Sam is going to get his. Bonuses are taxable income, so don’t get in the position to lose.”

Second, the first check may be the biggest check you receive because natural gas wells typically produce more in the beginning.

Third, “whatever you get, enjoy it but don’t be dependent on it.”

Using his recent $120-something royalty check as an example, Dark reminded those with dollar signs in their eyes, “it’s going to have to be quite a well or you have to own a lot of land.”

Dark shared examples from his experience as a landowner and admitted to not having read his lease until recently. “These checks might change where you eat, not where you live.”

He advised every landowner to read their lease agreements carefully. He reminded the audience not to assume anything just because it was verbally implied, “If it’s not in there, it’s not in there.”

Dark also addressed getting the best deals. One, go together. Negotiate as a group. “Landmen actually like it,” he said, because it saves time and gets leases signed quicker. Second, Dark said to have more than one company’s offer. Third, he addressed the fear of getting left out. “You’re better off signing a lease that is not perfect, but you want it as close to perfect as possible,” he said. “Whatever you sign a contract at, you can be sure that someone else got more. You need to get over that.”

In a follow-up interview, Spigener said the association chose to have an informational meeting first, then direct residents to leaders in their area.

Now that residents have a little more information, meetings should take place on a smaller scale within their neighborhoods and subdivisions.

“Southern Hills is made up of about 10,000 households in the area,” she said, adding that in this instance is too massive an area for one blanket deal. Spigener still believes neighbors should talk to each other and join forces.

Her advice? “I have been suggesting if they have no neighborhood organization or don’t know of a leader in their area, to get a legal pad and gather numbers themselves.”

Spigener said in her experience as a Realtor, “we never had to worry about oil or gas leasing. Until a few months ago, there wasn’t a question.”

In January, the Realtor board began requiring the use of the state-mandated contracts, which address mineral rights with a specific line item.

“It’s becoming an issue now. Many real estate companies brought in attorneys to familiarize agents with the new issues and train them on how to address and respond to them.

“I haven’t noticed much change in the residential plots, but it is sure to affect those with acreage. And I would bet anyone with some acreage would want to hold onto it for a bit,” she speculated.

Spigener said, “There needs to be another meeting now. The residents need to get together. I have been advising others to join up, and I think after (the June 17 meeting) that is more likely to happen.”

NATCHITOCHES — There’s one certainty concerning the Haynesville Shale and Natchitoches Parish: No one knows if the potentially-mammoth natural gas deposit even reaches that far.

That uncertainty didn’t prevent more than 600 people from attending a Wednesday night information forum with representatives from the Louisiana Oil and Gas Association, a non-profit that represents the independent and service sectors of the oil and gas industry in Louisiana.

Residents of Natchitoches Parish filled the Natchitoches Events Center for information on land leasing, royalties and potential red flags.

James Dean left with a pretty good understanding of the shale and what to expect. Of course, Dean came in with a pretty good understanding. The former oil man — he worked for oil companies Penrod and Mobil — said the Haynesville Shale is in its “infancy.”

“Only time will tell,” he said about to how big the shale could be. Dean’s comments summed up the basic points of the forum.

So far, the shale has primarily been confined to northern Louisiana, near Shreveport. No one, not even the oil companies, knows how far it goes. That will only be determined by seismographic measurements.

“This is the beginning, but we don’t know,” said Don G. Briggs, LOGA President. Only about 50 wells have been dug within the existing Haynesville Shale-boundaries.

Briggs added that the reason for the forum was due to “a lot of misinformation.” His hope is to provide people with “straight-forward, unbiased information” regarding the shale — where it is and how much to expect for a land lease.