Replies to This Discussion

Permalink Reply by tc on January 5, 2015 at 3:38

Here is an interesting article.  I found this very surprising.

According to the Financial Times, natural gas delivered this past weekend to a pricing point in Leidy, Pa., sold for just $0.80 per thousand cubic feet.

http://247wallst.com/energy-economy/2015/01/05/as-crude-oil-posts-n...

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on January 5, 2015 at 3:51

We often discuss NG pricing as if it was uniform across all regions.  There are basis differentials for all pricing hubs.  Most of what we see is Henry Hub pricing but there is talk of using Dominion or some other hub for a future price base.  Continued limited take away in the Marcellus creates some significant price depressions.  It will be a decade before many New Englanders have the option to switch from heating oil to NG.  Demand and access will eventually balance and remove some of the price spikes.

I agree with tc as to the forecast for a limited period of extreme cold followed by a return to more seasonal temps.  Those utilities that run out of supply before the February contract may however pay a steep price on the spot market for enough NG to finish out January.

• ▶ Reply

Permalink Reply by olddog573 on January 5, 2015 at 5:26

Personally, with these prices, I would rather have my wells re-fracked than have more drilled. I would also think it made more since economically for companies in the Haynesville.  Especially considering the demand scheduled to come on line in the coming years.  Any word on what companies (EXCO has announced) are now looking at re-fracks considering these prices?  

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on January 5, 2015 at 5:32

There remains little detail available regarding re-fracs of Haynesville Shale wells.  Until there is some reliable data on the economic viability of re-fracs and the percentage of existing wells that are good candidates for being re-fraced, the jury is still out.  If we assume that the wells we have discussed previously as re-fraced were good candidates and that the re-frac was conducted without any problems it is questionable whether the increased production was profitable compared to the cost.

• ▶ Reply

Permalink Reply by adubu on January 5, 2015 at 5:34

does re-frac in HS pay off? I understand it has to some degree in the Barnett, but HS different rock

• ▶ Reply

Permalink Reply by adubu on January 5, 2015 at 7:23

skip--- is cost of drilling/ completion  of a well about 40% drilling and 60% Frac/completion not accounting for leases, etc. or % different for each 

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on January 5, 2015 at 7:50

Depends on lateral length.  Well designs with 4500' to ~5,200' laterals (2009 - 2013) were close to 50/50 baring any mechanical problems.  More modern designs (Cross Unit Laterals in the LA HA) are closer to 45% drilling and 55% completion.  In plays with laterals >6,500' the completion costs can be between 55 and 60% of total well costs.  Frac stage lengths have remained relatively constant in relation to lateral length however in some plays such as the TMS the volumes of proppant pumped per stage has gone up also increasing completion costs.

• ▶ Reply

Permalink Reply by john goodday on January 5, 2015 at 8:10

$2.94 natural gas price in the dead of winter makes you wonder what the price will be when the country warms up in the spring.  Greater reason to shudder when hedges roll off in the summer.  

Plus or minus -  Haynesville wells will need 5 BCF to break even at that price.  Again - the question is which Operator / Company will make any kind of  profit.  I cannot see BHP, CHK, EXCO, ECA, APC doing so, but a strategy of real curtailment would make for a better business model going forward with the major operators around the country trying to make real progress to benefit the oil & gas industry.

• ▶ Reply

Permalink Reply by Hopeful About Natural Gas on January 5, 2015 at 10:30

What is the effect of the shale companies debt load?

I have heard (years ago) that energy companies debt was enormous and that the companies did not have the option to cut back production, they must pay their debt. How accurate do you think this is?

HANG

• ▶ Reply

Permalink Reply by adubu on January 5, 2015 at 11:00

HANG-- all depends on company-- the smaller upstream E&P companies with leveraged debt are in trouble ( they can not drill them self out of hole if enormous debt) vs the large companies multiple integrated investments like XTO/XOM can continue without problems except a decrease in EPS for a very long time plus will pick up some good assets properties that go on fire sell

• ▶ Reply

Permalink Reply by Hopeful About Natural Gas on January 5, 2015 at 14:29

Thanks adubu. It would be interesting to see a list of the companies and their debt load. I can see how some leveraged companies could drill on and on and still be unable to service their debt.

• ▶ Reply

Permalink Reply by adubu on January 5, 2015 at 14:37

Leveraged companies will not be able to drill on and on --- no money

• ▶ Reply

• ‹ Previous
• 1
• 2
• 3
• 4
• Next ›
• Page