It’s no secret—a wall of demand is looming over the energy industry as artificial intelligence adoption picks up and data centers need more power.
Aethon Energy Management plans to capitalize on the increased need for natural gas with its development in the Western Haynesville Shale.
And the Haynesville has its benefits. The shale formation has a low emissions profile, is high pressure and requires relatively low compression and treatment, said Gordon Huddleston, president and partner of Aethon.
The private investment firm has a game plan: drive down costs with vertical integration and adopt newer technologies to pull resource out of the ground over the long term.
Growing demand is “going to necessitate unlocking additional reserves and new areas,” Huddleston said.
Huddleston dove into the details of the Haynesville’s benefits and the company’s game plan to meet energy demand in this exclusive interview with Hart Energy’s Chris Mathews at the Energy Capital Conference in June.
Chris Mathews, senior editor of shale and A&D, Hart Energy: Hi, my name is Chris Matthews. I'm senior editor of shale and A&D at Hart Energy, and I'm joined by Gordon Huddleston. He's president and partner at Aethon Energy Management. We're here at Energy Capital Conference at the Post Oak Hotel in Houston. Gordon, thanks so much for being here again.
Gordon Huddleston, president and partner, Aethon Energy Management: Yeah, thanks for having me. Good to see you.
CM: Let's talk about emerging plays and where you might think some of the most exciting sort of exploration activity is happening right now.
GH: Well, certainly in the Haynesville, we're pushing the boundaries on the play, and we're excited about our Western Haynesville development and just other step-out areas, and that's been going on for some time now. One of the unique things about Aethon is that we're vertically integrated, so we have our own midstream system and we're able to tie in new areas into that existing system that helps drive margins. But I think you're seeing that story in a lot of other basins as well. And I think it's very exciting. With the Encino announcement with EOG, they went up in Utica, really did a greenfield leasing campaign. We’re able to take some of their key technologies and learnings and apply that to that basin, and industry's known that there's this resource there. It was appraised a long time ago, but now we're using the newer technologies and also different ways of looking at seismic and reprocessing, and then different ways of completing and drilling these wells that make the returns much more attractive. So I think that's really exciting and we're going to be continuing to do that because we’re seeing demand growth, especially on the natural gas side, and that's really going to necessitate unlocking additional reserves and new areas.
CM: No, absolutely. And kind of back to the core of the Haynesville, where Aethon, you guys are the second largest gas producer in the Haynesville. What is the state of, you mentioned Cotton Valley, maybe sort of coming back to the Cotton Valley, just the immense stacked pay in the core of the basin. What sort of new trends in development are you looking at or how do we get the most out of the Haynesville stacked pay as this wall of demand is looming?
GH: Sure. I mean, I think when we think about, we're looking at our dispatch curve, we're looking at both near-term opportunities to step out and add in zones that have been historically developed that maybe aren't well understood in these step-out areas. But also things like the Cotton Valley and others that we know are there and they have their own issues around cost structure, in that case, water handling and others.
And we're just focused on how do we think about taking a long-term view to develop the resource we have. And if you are methodical and focus on engineering and solving the problem and have enough time, you can do that. And so we're looking five, 10 years out, 15 years out, how are we going to develop this resource? And we're thinking about that too from an infrastructure build-out standpoint. So when we build infrastructure, we try to be thoughtful about the future. And then incremental costs could be relatively negligible to give you that optionality down the road. And so that's something that I think Aethon really makes a point of trying to do and be strategic.
CM: Yeah. Well, it's an exciting time to be a gas producer in the Haynesville right now, it seems.
GH: That's right. I mean, today we're producing about 2 Bcf, on a gross basis around 2 [Bcf] net. And as a private equity firm, we are obviously very focused on returns, not that others aren't, but ultimately price has a big impact on that. And that's ultimately outside of our control. But I think fundamentally just the shift and the recognition of the important role of gas, and that's what many of us in industry have been saying for a long time. And it's nice to see some recognition of that, but also trying to do it in the most environmentally sensitive way and as low emissions as possible.
And Haynesville is unique that it has a very low emission profile, high pressure, virtually no compression, very little treating required. So this gas is effectively ready to be consumed, and that's beneficial, reduces the footprint, but also it's very close to demand, and so you don't have the transmission emissions as well that you have in some other areas. So all these things make it very attractive and we have the ability to ramp it up and ramp it down. So it is really acting as a big synthetic storage piece for the overall supply and demand balance.
CM: The big gas bank out in the Haynesville. Got it. Well, Gordon, again, thank you so much for being here at ECC. We appreciate your time.
GH: Yep. Thanks for having me, and great to see you as always.
CM: Thanks for your time for watching and for more head to hartenergy.com.