M0re about Shale NG and the Marcellus Shale from Deutsche Bank
Since the data in Figure 2 was compiled by the EIA in late 2007, we estimate that the
Barnett Shale has already assumed the #1 spot, based on current fieldwide production
estimated approaching 4 Bcf/d. Given the early promise of the Haynesville Shale of
northwestern Louisiana, we believe that play will occupy a top spot on top 10 list (if not the
top spot) within a matter of years.....
We believe that the Marcellus Shale, and further out the Horn River Basin
Muskwa/Ootla shale in British Columbia, could rival or trump the Barnett Shale in
production and reserves. These and other shale plays will be examined in detail within this
report. We estimate that the top ten onshore gas fields listed in Figure 2 account for nearly
25% of daily gas production in the U.S., and believe “big fields,” including shales, will
continue to account for a growing share of an otherwise-mature North American producing
basin (see Figure 3 and Figure 4).
We believe the Marcellus
Shale offers the most
attractive range of IRRs on a
type-well basis, due to
broadly lower royalties in
Appalachia and premium
natural gas pricing
We also ran type well economics assuming natural gas prices ranging from $8/MMbtu
to $10/MMbtu, to generate the IRR ranges illustrated below in Figure 9. Our type-well
economics indicate that (perhaps contrary to current consensus views) the Marcellus Shale
appears to offer the most attractive range of IRRs on a type well basis (72-100%), benefiting
from broadly lower royalties in the region and premium natural gas pricing given the play’s
proximity to populous consuming markets.
See also figures 9 and 10 on page 22
Figure 10 depicts the NYMEX natural gas prices required to drive the individual plays’ returns down to a 10% weighted average cost of capital. Here again Marcellus and Haynesville lead the pack, with very low breakeven prices of $3.17 and $4.73/MMbtu, respectively.
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