Oil and Gas Are Back and Booming

Mansfield Mayor Thomas Jones is looking forward to a strong area economy with the recent uptick in exploration activity in the Haynesville Shale.  The Wall Street Journal reported The Haynesville basin in Louisiana and Texas is humming with drillers. Among them is Chesapeake, a fracking pioneer that was in bankruptcy just two years ago.

Chesapeake Energy Corp. was one of the biggest stars of the fracking boom, riding high for years on its ability to tap vast troves of American natural gas.

By the summer of 2020, the pandemic and lockdowns had caused revenue to dry up, and the company, after a big, ill-timed expansion, filed for bankruptcy protection.

Yet last year, Chesapeake racked up $1.3 billion of profit in the first nine months. It sent its shareholders $800 million in dividends over that same period. Its stock has more than doubled since the company re-listed its shares in early 2021.

Thanks to a mix of events, from the Russian invasion of Ukraine to the U.S. economic recovery, fossil fuels are showing surprising resilience, despite President Biden’s push to transition to clean energy and the industry’s own history of boom-bust investing and heavy reliance on debt.

U.S. production of natural gas—Chesapeake’s focus—has hit record levels. The country’s crude oil production remains shy of the 2019 level but is otherwise at a peak. Exports of both gas and crude are hitting new highs, easily outpacing overseas sales of aircraft, pharmaceuticals, food and cars. Exxon Mobil Corp.’s shares rose 80% last year.

The Biden administration has limited drilling on federal lands, but oil and gas companies have tapped the nation’s vast private shale reserves to drive production higher.

As surging global demand for U.S. oil and gas has fueled high profit margins for producers, Mr. Biden has accused them of profiteering during a crisis. They take a different lesson from their fortune. “What’s really happened is the world has realized there is a need for hydrocarbons in energy policy,” said Domenic Dell’Osso, Chesapeake’s chief executive.

Chesapeake recently put a seventh drilling rig to work in the Haynesville basin, a giant natural-gas field straddling east Texas and northwest Louisiana that has also known booms in the past. In all, 69 drilling rigs were operating there in early January, compared with 32 in the summer of 2020. The local economy is cashing in.

This boom is different from earlier ones. In gas-production surges during the decade before 2020, many drillers expanded at a breakneck pace, loading up with debt to do so. They rushed into the Haynesville region when gas prices rose, but just as quickly packed up when prices fell, taking away the jobs, tax revenue and landowner royalties.

This time, domestic and international forces have the companies betting on steady demand for Haynesville gas for several years at least. In addition, their shareholders are insisting they return more of their profit to investors instead of using it to expand. It’s a strategy that has positioned them to better handle swings in commodity prices, executives and analysts say.

Another difference: The windfall for producers is largely coming from exports, which limits the extent to which the increased production translates into lower prices for American consumers.

In northwestern Louisiana’s DeSoto and Caddo parishes, roads are bustling with trucks, and workers have filled RV parks. “There’s a lot of work for everybody right now,” said Marcos Arellano, a worker on a rig operated for Chesapeake by Independence Contract Drilling.

Mansfield had roughly a 25% increase in sales-tax revenue in 2022, said Mayor Thomas Jones. The bounty enabled the town of 4,700 to afford a $2,000 payment to each of 62 municipal employees and to spend about $250,000 for a fire truck, he said.

At the local Comfort Inn & Suites, the influx of workers has meant $2,500 to $3,000 more monthly revenue than a year ago, said general manager Ba’Sha Adger.

And hefty royalty checks have started landing in the mailbox of Jim May, a 74-year-old landowner. On property he leases to Southwestern Energy Co. and Aethon Energy Management, the companies drilled 11 new wells in 2022 and re-fracked three aging ones.

Chesapeake produced 1.6 billion cubic feet of gas a day in the Haynesville during the third quarter of 2022 and says it plans to modestly increase production in 2023. Competitor Comstock Resources Inc., majority-owned by Dallas Cowboys owner Jerry Jones, has also said it was drilling more there.

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By Benoît Morenne and Jon Hilsenrath

Photographs by Rory Doyle for The Wall Street Journal