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Permalink Reply by olddog573 on July 1, 2016 at 4:54

I like that number. Who would have thought we would be excited about 2.917 gas?

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Permalink Reply by Skip Peel - Mineral Consultant on July 1, 2016 at 5:04

Does it signal a bottom to the NG price trend?  One month doesn't qualify on its own so we'll have to wait and see.  The better question may be, will a modest increase in price cause companies to commit more development capital and deploy more rigs. Keep in mind that a single rig can now drill about the same length of perforated lateral that used to take two rigs.  With HC wells now a reality even a modest increase in the rig count could have a significant impact of the rate of production.

A number of Haynesville operators have made statements in corporate presentations that they can make an acceptable profit on some wells at prices above $2:50/mcf.   Of course the rock quality matters and not all the play would be economic at those prices.  If the price could manage something modestly north of $3 with some stability I think all the HA operators would implement a more aggressive drilling schedule.

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Permalink Reply by Skip Peel - Mineral Consultant on July 1, 2016 at 9:03

Natural Gas Rises to One-Year High

Forecasts widely predict higher-than-average temperatures throughout summer

By Timothy Puko Updated July 1, 2016 3:26 p.m. ET wsj.com

Natural gas prices rose to a one-year high Friday as summer demand keeps boosting prices.

Natural gas posted its fifth straight week of gains. Front-month prices at their peak Friday had gained 52% in only a month since the June contract expired at just $1.963/mmBtu on May 26.

Natural gas for August delivery settled up 6.3 cents, or 2.2%, at $2.987 a million British thermal units on the New York Mercantile Exchange. It is the highest settlement since May 2015.

“The rally has caught me off guard by its strength,” said Gene McGillian, research manager at Tradition Energy. “It seems like the momentum will carry us through” to $3/mmBtu.

Only a few months ago natural gas had set a record low, inflation-adjusted price for its history of Nymex trading. A warm winter had caused tepid heating demand, and so much gas was built up in storage that stockpiles set a record high for the end of winter. Even now, production is high enough that some expect stockpiles by November to set a record high for the start of the winter.

The La Paloma plant in McKittrick, Calif., uses natural gas to generate electricity. Forecasts for higher-than-average temperatures in the U.S. have driven up the price of natural gas on increased demand for gas-fired power.

But production has fallen slightly from its record pace in February and investors have bet hard that the market will rebalance within the next year. Weather forecasts widely predict higher-than-average temperatures throughout this summer, driving demand for gas-fired power to run air conditioners.

Weather has already been hotter than normal in many parts of the country. And unexpectedly low nuclear, wind and hydropower production have also kept feeding demand for gas-fired power even as gas prices have risen and sent more power generators to burning coal.

Friday weather updates from both MDA Weather Services and Commodity Weather Group LLC—two widely watched private forecasters—are showing temperatures as much as 8 degrees Fahrenheit above normal spreading across nearly the entire country in the first half of July. The hottest of those temperatures are covering large parts of the southeast, strengthening demand expectations in what analysts say is the biggest region for gas-fired power.

“At some point the fear of oversupply went away. That led the way for prices to move higher,” said Kent Bayazitoglu, analyst at the energy-consulting firm Gelber & Associates in Houston. “We think it’s probably been a bit too much too fast and prices will probably soften in July.”

The U.S. Energy Information Administration said Thursday that stockpiles grew last week, rising to 3.1 trillion cubic feet as of June 24. That is 23% above levels from a year ago and 25% above the five-year average for the same week.

 

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Permalink Reply by jscottrx on July 2, 2016 at 10:54

Natty spot price chart since 1999. The $2.58 was June 10-2016.

Attachments:

• natural-gas-prices-long-term-chart[1].png, 48 KB

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Permalink Reply by jscottrx on July 2, 2016 at 11:45

- the phrase i can't wait to hear in the next year: "what glut?" lol.

- { `_`} .

natural gas. cheap. plentiful. clean. made in the USA. natural. gas.

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Permalink Reply by Skip Peel - Mineral Consultant on July 2, 2016 at 13:35

Although the price may be depressing it is the confidence in the abundance of supply and the long term price forecast that will continue to drive more end users to make long term commitments to natural gas.  The other side of the coin to low nat gas prices is $100B in capital projects in the central Gulf Coast and the Lower Mississippi River Industrial Corridor and an increasing use by electric utilities and merchant power generators.  Demand is set to increase, incrementally but steadily, for decades to come.  Natural gas focused energy companies that can manage the downturn have good long term futures.  In fact, the prolonged depressed price cycle has taught the players to be leaner and more efficient.  The idea of any company making an acceptable IRR at $3 to $3.50/mcf four years ago would have seemed laughable.

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Permalink Reply by Skip Peel - Mineral Consultant on July 2, 2016 at 14:34

Mexico's Ever Growing Natural Gas Market

Jude Clemente Jul 2, 2016 @ 06:20 PM  forbes.com

Mexico is a very fast growing natural gas market, and imports from the U.S. could reach 8-10% of current U.S. production much faster than most realize. The 2013 Energy Reforms are a historic opportunity for state-owned Pemex to increase oil and gas production and lift the economy. Pemex has been forced to unfairly provided the government with 35-40% of its budget. Too lengthy of a subject to detail here (check here, here, here), but the reforms and the Implementation Plan should install a fully competitive Mexican natural gas market around 2018.

Like the upstream oil and gas sector, Mexico’s midstream has been plagued by underinvestment for a very long time. Today, despite having well over four times more people, Mexico has about 1/10 of the pipeline system that Texas has. Much of Mexico’s pipeline and generation sectors have been centered in the eastern/northern parts of the country, and the infrastructure buildout is meant to bolster the southern/western areas that have been underdeveloped and isolated.

And with far less costly regulations and environmental opposition, “TransCanada finds warmer welcome in Mexico for pipeline business.” Mexico’s natural gas midstream sector should expand in length by over 90% in the next three years to 13-15,000 miles of gas pipelines.

Limitations for both electricity and natural gas have been two key factors constraining output growth in Mexico. The McKinsey Global Institute reports that “despite its energy endowments, Mexico lacks a cost-efficient and reliable power supply, which limits the productivity of even the best-run enterprises.”  Mexico’s transmission and distribution losses have been a crucial weakness and run about 20% of total generation, twice the OECD average.

Poor investment in infrastructure has led gas pipelines to operate near maximum capacity, so even smaller problems can quickly get magnified. Augmented by rising demand, limited gas transport capacity have led to severe gas shortages. Recently in just six months time, “Mexican business leaders say they lost $2.25 billion in revenue.”

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