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Haynesville Shale Needs $6.50 Gas To Break Even: The Business Model Is Broken

The Haynesville Shale play needs $6.50 gas prices to break even. With natural gas prices just above $2/Mcf (thousand cubic feet), we question the shale gas business model that has 31 rigs drilling wells in that play that cost $8-10 million apiece to sell gas at a loss into a over-supplied market.

We first evaluated the Haynesville Shale in 2009 and the conclusion then was the same as it is today: the average well by top operators will produce about 4 Bcf and is not commercial at gas prices below $6 or $7 per Mcf. The play has two insurmountable geological problems. First, the shale is not brittle and, therefore, does not respond well to hydraulic fracturing. Second, the reservoir is over-pressured and compacts when gas is produced.

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