NYT Inventory Regional Breakout
With the addition of our recent batch of thermal drone imagery we now have complete coverage of CHKs TIL activity and running NYT inventory since the beginning of 2024.
How Does it Reconcile to CHKs Stated TILs?
In their Q1’24 earnings presentation CHK revealed their “Deferred TIL Inventory” as well as their TIL deferral goals for the remainder of the year.
The company claimed to have 22 DTILs at the end of Q1’24. So why then does SynMax show a NYT inventory of 28 on 3/31/24? The difference is in the word “deferred” meaning CHK has chosen those wells to be held back strategically. Transforming NYT inventory into DTILs requires that we know what CHK plans to do with the completed but not yet TILd well. That is hard to know with certainty, although we can say that it is more likely that a TIL is a DTIL the longer a NYT ages. 30 days beyond completion is the TIL lag average. Another way to separate DTILs from NYT inventory is to simply remove everything that ends up being TILd.
With the benefit of hindsight we can see that wellpads 3180 and 471880 were both in a TIL state on 3/31 but were later turned in line indicating that those combined five wells are not “deferred” TILs. This brings our adjusted TIL number to 23, just one off from CHKs number.
Assuming no more TIL jobs between now and the end of June and adding in CHKs wells currently being fracked we end up with a NYT inventory of 41, just shy of CHKs stated end of Q2’24 DTIL goal of 45. Said another way, CHK has until the end of June to net an additional four wells into their NYT inventory if they want to meet their guidance. This should be very easy for them to achieve.
What This Means for Production
The major takeaway from this data is that CHK is executing their TIL deferment strategy almost entirely in the NorthEast. As of our latest measurement CHKs NYTs are 83% concentrated in NE PA.
This makes sense, given NorthEast basis prices which incentivize TIL deferral much more than the Hub would. Now that we know TIL activity is more closely tied to NorthEast basis than Hub prices, we expect as our base case that CHK will follow their TIL deferral plan and not bring NorthEast TILs back until November at the earliest.
This also fits what we have been observing from our Haynesville Short Term Forecast model. Because the STF is unconstrained it acts as an indicator for what production would be in the scenario where TIL deferrals had not happened. Our Haynesville STF showing smaller than expected difference to our pipe scrape model adds credence to the developing narrative that TIL deferrals are primarily a NorthEast story.
Whats Next?
We will continue persistent monitoring of all NYTs and send updates as things develop. We are scheduling our next batch of thermal drone flights to capture EQT and SWN wells in the NorthEast.
