It was over a month ago that our Haynesville Short Term Forecast first made its startling prediction that the region’s steady production growth would soon come to an end. The model, which runs every three days and calculates gas and oil production on over 250,000 wells, using completions from daily satellite images, has wavered little in its prediction since then. In fact, its prediction for August, which has just become available, shows declines continuing.
The Model
Haynesville frac crew activity has declined steeply from 24 at the beginning of May to as low as 17 in recent days. Interestingly, the short-term model began forecasting June declines before the drop in crews was known. That is because the model relies on completions and accounted for reduced efficiencies as crews began to idle. SynMax completion intelligence in Haynesville was the first to capture what has been to many a surprise ~20% decline in completions for May. SynMax first posted its observation of 48 Haynesville completions for May weeks before the EIA DPR posted a similar number of 50.
Pipe Scrapes
Much of the market has dismissed the Haynesville decline thesis as described by pipe scrape models due to the known deficiencies of such models, the timing nearby of LNG maintenance and the Acadian expansion. While the timing is coincident, LNG terminal maintenances do not directly impact gathering system pipeline nominations. Indirectly, large changes in gas flows can cause gas to ‘change course’ impacting the sample of visible interstate vs invisible intrastate noms but this effect is far more pronounced in regions where scrape samples are small. Haynesville scrapes have historically tracked well to production and we do not believe this theory is correct. Furthermore, the Acadian pipeline expansion impact has already been added back into our pipeline model as was noticed to our clients last week. The historical fit of our model’s forecast to reliable state production data leads us to believe that the pipe scrapes are, in this case, more or less correct. Haynesville new well production is insufficiently replacing the regions steep declines. This is most likely a prolonged producer reaction to gas prices. We do not believe this is yet the result of any curtailment or shut-ins.
