Hi, thank you for joining us. I'm Nissa Darbonne, executive editor-at-large for Hart Energy. We're visiting at DUG Gas Conference in Shreveport, Louisiana with David Lawler. Dave is the CEO of Kimmeridge Texas Gas (KTG), whose sponsor also owns the permit for Commonwealth LNG, which is planned for just south of Lake Charles, thank you so much for joining us, Dave.
David Lawler, CEO, Kimmeridge Texas Gas: Thank you Nissa. Happy to be here today.
ND: And tell everyone what is the idea behind Kimmeridge Texas Gas and Commonwealth LNG? What is the ultimate plan?
DL: Okay, fantastic. Well, the company does have a specific mission. So what we're trying to do is build an integrated gas independent. And what we mean by that is we're going to own an upstream company, and we do, and we're going to grow that upstream company from about 500 MMcf/d, up to a 1 Bcf/d by the end of the decade. And then what we're going to do is put a good portion, maybe 20%, 30% of our own gas, we're going to synthetically direct to Commonwealth LNG. There is two companies underneath the Kimmeridge umbrella. There's Kimmeridge Texas Gas, and then there's Commonwealth LNG. I'm also a director on Commonwealth LNG.
The idea is that this plant will deliver about 9.5 million tons per annum (mtpa) to international markets and Kimmeridge Texas Gas, again, we'll produce around 1 Bcf, putting as much as 20% to 30% of the equity volumes toward the plant so we can capture the international pricing. So we think this is a unique model. The strategy the company is to focus on is the dry gas window of the Eagle Ford at this point. And then we're just waiting on the non-FTA (Free Trade Agreement) DOE (Department of Energy) permit, which we think will come this summer. Then we also are looking for final FERC (Federal Energy Regulatory Commission) approval to arrive this summer. So we think we can take FID (final investment decision) by the end of 2Q or early 3Q, and then we'll start building the project
ND: And for South Texas gas, you were talking earlier this morning describing how prolific these wells are, and I think you said the economics of them are less than $1 per MMcf/d. What is the nature of this gassy fairway, the Southern Eagle Ford gassy fairway that makes these so prolific? Is it something unique to KTG?
DL: Yes, great question. So I think we're all familiar with that the Eagle Ford is a massive trend. The focus has been the last few decades to stay in the liquids window and then in the condensate window. But the trend does continue and get deeper when you move into the dry gas window. This is a high pressure, high temperature zone, very similar to the Haynesville, but it's not as expensive as the Haynesville and the drilling is easier. So we are at the moment developing wells for less than $1 at F&D (finding and development) cost. So it's a very executable program, then they're, again, very prolific. This is an area that typically the industry hasn't focused on as much as like the Marcellus and the Haynesville and the Permian and in some cases the Bakken. But this is a region that is prolific, is easier to drill, and we think will help us go from 500 MMcf/d up to 1 Bcf/d here by the end of the decade just with what we have in house. We have over 200,000 acres, we feel like that will supply up to 20 years of drilling and take us well into the project execution phase of Commonwealth LNG.
ND: And I don't remember how the math goes just off right now, but 9.5 mtpa. How much Bcf/d is that?
DL: I’m rounding, but it's about 1.3 Bcf/d.
ND: I understand from your remarks this morning that you would be interested if picking up gas production potential outside of South Texas that it sounds like the first place you'd go is the Haynesville picking up if not organically, then possibly inorganically?
DL: That's really what we're thinking because the wells we're drilling now in the dry gas Eagle Ford are most like the Haynesville. We think there's some natural synergies for us as a company to continue around the trend, have production close to the plant. So I kind want to be clear too, we won't have a pipeline that directly connects the wellhead to the plant. We will use intrastate pipelines and we will have custody break for the molecules through the system. But at the end of the day, we'll have the production side and then obviously the plant to take the product to international markets. We think it makes sense to be a part of the Haynesville because it's high pressure, high temperature. We think it's a skill that's intrinsic to Kimmeridge Texas Gas. And so what we're open to is acquisitions. Clearly if one comes along that's accretive and makes sense, but two, we're also open to partnerships. So we think that this particular model is what's needed to maximize revenues of gas companies going forward. So we think we're an attractive partner, not only for our own capability, but an offering that other companies could join us in building a scalable company and then participate in international pricing.
ND: So your FERC review is scheduled for this July.
DL: Correct.
ND: I wanted to ask about your thoughts on having to endure that LNG pause, which didn't affect those who already had permits such as Commonwealth. It only affected issuance of new permits. But Scott Sheffield, I visited with him last week and he was suggesting that Congress could legislate that there won't be any interruptions of LNG permitting going forward so that these things are not imposed and lifted by executive order. Do you feel that going so far as that is necessary?
DL: Well, I think as you've seen even recently, markets crave stability. For investments we need stable platforms. So I think some sort of action that we could protect investments, particularly on the world stage. So as you know, lots of international money and capital is coming into the states for LNG, so we want to be careful what kind of messages we send overseas that suddenly a project can be pulled. That's one Scott, obviously, is a leading thinker in the business, but I think I would just be in the general camp of we need to be very careful about the messages we send. And we certainly at this point in society don't need to be limiting any form of energy. I'm also a big fan of solar, a big fan of wind. And then I think ultimately natural gas is a destination fuel that really is only now going to be fully appreciated for its capability. And by that I mean obviously there's support for hydrogen in the future. Its contribution to fertilizer, helping to feed the world. It's a very important product that I think we need to recognize it does lower emissions on a world scale, is very important to help economies grow and it's an asset from a U.S. perspective that we need to protect. So that would be the way I would think about it.
ND: Wonderful. Thank you so much Dave. I appreciate it.
DL: All right.
ND: And thank you for joining us. Stay tuned here for more actionable energy intelligence.