A&D Intelligence

Nigh two months after the word “Haynesville” went public, discoverer Chesapeake Energy and challenger Petrohawk Energy are in a battle royale for mineral rights in the once-secret shale play in northwestern Louisiana and East Texas.

On Friday, Chesapeake shouted that it has amassed an additional 100,000 acres in the play since mid-March when it first announced the discovery (after being outed by Petrohawk), and now holds upward of 300,000 acres with a goal of 500,000.  “Our land acquisition machine rolls on,” states Chesapeake CEO Aubrey McClendon. Today, Petrohawk punched back, stating that it now holds commitments for 150,000 acres, up from 70,000 in early April, with a goal of 400,000.

If you own a front porch in the neighborhood, brew up a pitcher of iced tea and expect smiling visitors. Feel free to rock and chat awhile, as the price per acre goes up by the minute.

McClendon says the acreage values have escalated “dramatically” in the past couple of months, “and so we have the option of either dropping out or to continue in the play. We think it makes sense to continue.” He says Chesapeake is starting out with 300,000 acres in the Haynesville “at a cost basis that will always be very, very substantially below” any basis anyone else can approach. He equates 1,250 drill sites for each 100,000 acres. “Locking down these acreage positions early is very important,” he says.

Chesapeake has drilled eight wells to date, with three waiting on completion and all eventually drilled horizontal. “We are very happy with our well results today, but I doubt that our first four horizontal wells are going to be the best four wells we ever drilled in this play,” McClendon says.

Petrohawk has identified the Haynesville as one of its four core operating areas. CEO Floyd Wilson says, “An early mover advantage clearly rests with Petrohawk in the evolving Haynesville shale play. We have begun a significant multi-year investment in this exciting new resource opportunity.”

In fact, Petrohawk increased its planned capital budget for 2008 to $1.3 billion—up from $800 million—with $384 million earmarked for the Haynesville; a total of 30%. Of that, $150 million is set aside for leasehold acquisitions and the rest for accelerated drilling.

Petrohawk is currently drilling its first horizontal well, a 4,000-foot lateral. A second rig is expected to begin drilling in mid-May with three additional rigs staging in for a total of five to six rigs running by 4Q08 with 10 wells drilled. Petrohawk expects to have gained 2,500 drilling locations in that time.

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