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Choked Haynesville Supply Hints at Brighter Year Ahead

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Haynesville operators are sitting on ~1.2 Bcf/d of unused gas production from choked or delayed wells, according to a review by East Daley Analytics of the ArkLaTex Basin model. This latent supply isn’t affecting markets now but does lend confidence in our bullish outlook for Haynesville assets in 2025.

Our estimate of spare production capacity is based on a trend EDA has observed in the monthly basin forecasts in the Production Scenario Tools (available in Energy Data Studio), whereby gas delivery from the Haynesville play in East Texas and northern Louisiana has consistently underperformed our model.

Since January 2023, producers in the Haynesville have cut drilling activity roughly in half, from a peak count of 91 rigs in March ‘23 to a low of 41 rigs in July ‘24. Today rigs sit at 44. Yet even with these steep cuts, gas production has fallen much more sharply than rig counts alone would indicate in our basin model. This wedge of ‘unseen’ supply includes wells that operators have choked back or shut in, plus a growing inventory of drilled but uncompleted wells (DCUs) as operators slow completion work.

tdn 9.23

This 1.2 Bcf/d of ‘ready’ production can come online more quickly than rig-driven supply and will help ArkLaTex producers respond rapidly to higher gas prices. In the US Macro Supply & Demand Forecast, we anticipate growing LNG demand this winter and through 2025 from the start-up of Plaquemines LNG and the Corpus Christi Phase 3 expansion.

G&P assets in the Haynesville have seen a weaker performance in 2024 given low prices and underwhelming supply. In the US Macro Supply & Demand Forecast, East Daley expects gas prices to rise above $3/MMBtu this winter, spurring a resurgence in Haynesville production.

This outlook for improved performance in 2025 is also reflected in the Financial Blueprints for Haynesville G&P asset owners. The figure shows ours EBITDA forecast for ArkLaTex assets by company, courtesy of the Peer Comparison Tool in Energy Data Studio.

As shown in the figure, EDA forecasts higher earnings in 1Q and 2Q25 for many Haynesville G&P systems, including for owners Energy Transfer (ET), Williams (WMB) and DT Midstream (DTM). Assuming new LNG projects start as planned next year, the latent Haynesville capacity gives us confidence that gas supply can respond rapidly and grow earnings for these companies. – Alex Gafford Tickers: DTM, ET, WMB.

 

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About the AuthorAlex Gafford

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