American Oil and Gas Reporter - March 2016 - 97

ConventionCoverage: Louisiana Oil & Gas Association

Haynesville Shale Remains
Profitable At Low Prices
By Dan Holder
LAKE CHARLES, LA.-American
technology has played a large part in
creating the flood of oil and natural gas
pushing down commodity prices. According to William Marko, managing director, energy investment banking group,
for Jeffries LLC, technology offers survival
if the financial sector cooperates.
Marko, keynote speaker at the
Louisiana Oil & Gas Association's annual
convention, held Jan. 27-29 at the Golden
Nugget Casino in Lake Charles, said five
years ago, Middle East political turmoil
would have added a $10 risk premium to
every barrel of oil, but the U.S. shale
revolution had kept that premium at bay.
In addition, he pointed out, efficiency
improvements are increasing oil and gas
supplies as service companies become
better at extracting hydrocarbons.
However, before the energy sector can
revive itself, it must quiet financiers seeking profits from oil and gas, Marko cautioned, saying most private money funds
today focus on investment opportunities.
"There will be a ton of assets on sale
in 2016," he predicted. "2015 was super
slow, about a third of normal. People are
going to have to sell because they don't
have any other choices on how to raise
capital. There will be a lot of demand by
private money looking for deals."
In an unprecedented achievement from
the preceding decade, U.S. producers almost doubled domestic oil output, from
5.0 million barrels a day to 9.5 MMbbl/d,
Marko applauded. Saudi Arabia and other
members of the Organization of Petroleum
Exporting Countries reacted with an attempt to flood the global oil market to
recapture market share, he said.
"I bet when they started this a year
and a half ago, the Saudis thought by
January 2015, the United States would
be producing 8.0 MMbbl/d or 8.5 MMbbl/d. But it took us from September 2014
until now to go just from 9.5 MMbbl/d
to 9.0 MMbbl/d, so U.S. production
shrank a lot less than anyone thought.
That is why this is lasting lower for
longer," he said.

For Louisiana operators, growth in
gas production means that companies
can make long-range plans, including
exporting liquefied natural gas. Marko
said those plans meant financial support
for projects, such as continued development of the state's Haynesville Shale.
Even as gas prices have fallen, Haynesville
volumes have held steady at 6 billion
cubic feet a day, which he characterized
as a significant portion of the country's
70 Bcf/d output.
According to a study by his firm, Haynesville producers cut capital expenditures
25-30 percent while doubling estimated
ultimate recoveries, Marko reported. "If
you take a bit of an improvement in
capital plus a doubling or more improvement on the Bcfs that you get for it, in
the old days where it took $5 or $6 gas to
justify drilling the Haynesville, now it is
something north of $2."
The depth and duration of oil and gas
prices' slump, Marko predicted, will
prompt a much quicker rebound than
most forecasts envision.
In other LOGA presentations:
* Bernadette Johnson, director of research and analytics at Ponderosa Advisors
LLC, said market drivers were working

in the United States, as evidenced by rig
counts and production declines. "Globally,
it is a different story. It takes longer to
work off that supply, and longer to push
that out. We have not really started to
correct the imbalance," she assessed.
* Gregory Robbins, senior vice president, corporate development, Memorial
Resource Development Corp., asserted
the state's world-class assets, combined
with a business-friendly regulatory environment, made Louisiana the right spot
for oil and gas production.
* Mark K. Miller, chairman of the
Independent Petroleum Association of
America, pointed out the challenges that
would loom after oil and gas prices recovered, and emphasized the industry's
need to secure its next generation of scientists and service company personnel.
Natural Gas
The natural gas picture is more favorable for producers, Marko assessed. While
storage levels exceed demand, climate
change requirements, emission issues,
transportation qualities and costs suggest
natural gas is the fuel of the future, he
maintained, noting an ExxonMobil outlook
projecting gas demand will double in the

Posing at the Louisiana Oil & Gas Association's annual convention are, from left, Dalton
Smith, Rio Oil and Gas II LLC; William Marko, managing director, energy investment banking group, for Jeffries LLC; and Louisiana Oil & Gas Association Chairman Bryan Hanks.
Smith introduced Marko at the event, held Jan. 27-29.

MARCH 2016 97

American Oil and Gas Reporter - March 2016

Table of Contents for the Digital Edition of American Oil and Gas Reporter - March 2016