I'd like everyone to think about something that has just been brought to my attention... It had been staring me in the face for a long time but I never actually considered it.

Let's take CHK as an example.

They are involved in how many shale plays and other drilling operations right now? Lets just say 20-30 active areas around the country. I don't know for sure.

Let's ignore the availability of rigs question and get more basic with it.

How much iron do you think is needed to pipe down to 12k feet and then vertically half of that amount? In addition to what is needed to build rigs and other misc uses. With all of these "resource plays" going on at once, where is one company going to source enough iron to get down into all of these holes? That is Aubrey's bigger concern I would contend, NOT the logistics of getting rigs into place to punch holes. I would also contend that may be why you are seeing some of CHK's holdings sold off. Not only for cash infusion, but because there simply aren't enough resources to go around.

What's my point and how does this relate to Natural Gas pricing?

The market will adjust itself accordingly, drilling accelerates.... then iron prices go up, then natural gas prices go up because of drilling costs. In direct correlation with the amount of supply, demand for raw materials will increase exponentially. This will keep pricing in check...the American ... and more importantly, world economy in action.

Next question... While we will hopefully decrease our dependence on foreign hydrocarbons (we currently produce most of our own Natural Gas, maybe we can shift from Oil to Natural Gas), where will the raw materials come from? Just how much iron can we produce in America?

Randy

Tags: Economy, Gas, Iron, Natural, Prices

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I recently talked with a representative at Williams Pipeline Co., out of Houston and he told me the gas companies can make a profit, albeit small, at $4.00 per mcfd.
PS. I guess we will get the iron/steel from China. That's where we get everything else.
Randy you are closer to the truth than you know. A close friend is in the business of selling various equipment that is used to treat and process the gas after it comes out of the ground and before it can enter a pipline for distribution and sale. He has told me that it doesn't matter what the gas companies are willing to pay for a piece of equipment they cannot get it becaues of the waiting list from the makers of the equipment is anywhere from 6 months to 2 years. Many of the old companies closed during the last bust and no new ones are opening to take their place. One company in S LA told him that there is a 6 months waiting time to just get the steel to start making the processing equipment. There are Federal regulations about the quality of gas before it can be sold or put in a pipeline. If it dosen't meet standards then the well is shut in. It wil take years to get all of this worked out.
These companies have had several years to prepare/schedule this play and others. They are not making profit estimates in a vaccum. They have contracts with rig mfgs outside the USA. I read of a Brazilian mfg who had a contract for 10 rigs from CHK which were already in production. They wond the bid in a bidding contest for the least cost. USA metal scrapers have been and are sending scrap metal to be recycled outside the USA which saves time and dollars to make new steel etc. Yes, it will take until the middle of 2009 to see things really roll but o/gs are and have been sourcing worldwide. they will meet their projections. TCB DS3
The O&G's have known about this Natural Gas Play in Louisiana for many years. They have had ample time to prepare. I hope and believe they took notes in the Barnett Shale and if they didn't, shame on that company. They know what is happening here in the State of Louisiana. They know what they need and they will get what they need. It's the American way.

The big and some of the smaller companies in this business have done their homework. They have solutions to acquiring rig availabilty just as they know how to acquire acreage in these plays. It's part of what they do!

They know what they are doing and have a plan. It's the companies that fly by the seat of their pants and react to their surroundings that end up falling behind and suffering in the end.

The O&G's will be fine....or the ones who have done their homework will be just fine and dandy.

Jaybird
They are moving by the seat of their pants in the background sir. ;)
I agree Randy....but I am glad they are least moving! :o)
This is addressed in the Shale to Shining Shale report as well.

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