Looks Like the Party Is Over (At Least for the Time Being)
My brother-in-law was in town from Houston over the weekend. He is a geologist who works deep water projects for Shell. He has been able to sit in on some forecast meetings for his projects and also on some meetings for various inland projects that he might start working on (none would involve any HS projects that Shell is currently involved with).
From the meetings that he has attended, it is his opinion that the industry as a whole is in for some rough times and could be so for an extended time period. He said that there have been numerous projects put on the shelf dust that have a high probability of success because the cost/profit ratio is out of whack and will get even more out of whack as the price of the product continues to decline. He does not see the price stabilizing any time soon unless there would happen to be the mother of all winters this years. Unfortunatley, it appears that global warming will make sure that this doesn't happen.
My family has yet to be approached about leasing our acreage. From the discussion that I had with my brother-in-law as to the cost associated with drilling a HS well, I am apprehensive that we will never be approached about leasing our acreage.
From the meetings that he has attended, it is his opinion that the industry as a whole is in for some rough times and could be so for an extended time period. He said that there have been numerous projects put on the shelf dust that have a high probability of success because the cost/profit ratio is out of whack and will get even more out of whack as the price of the product continues to decline. He does not see the price stabilizing any time soon unless there would happen to be the mother of all winters this years. Unfortunatley, it appears that global warming will make sure that this doesn't happen.
My family has yet to be approached about leasing our acreage. From the discussion that I had with my brother-in-law as to the cost associated with drilling a HS well, I am apprehensive that we will never be approached about leasing our acreage.
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Replies to This Discussion
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Permalink Reply by ELLIS HUGH on
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I put "when" first, then added "if" to satisfy both possibilities (please see above). If I don't cover both aspects of thought, there is always someone (you in this case) to comment on at least one part of my statement, no matter how insignificant. The whole post was about what will happen when things bounce back, not if or when. I am in the business but readily admit that I do not know much about the Haynesville. I do not actively work in the Haynesville, so lease bonus prices do not affect me either way. I am interested to see how it will pan out over the next few years. I do not believe lease prices will get that high again either, especially if you believe the comments that CHK and Petro will work more closely together to avoid competing as aggressively.
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Permalink Reply by intrepid on -
>>but I am interested to see how the industry and mineral owners will react to another "land grab" situation.
I think when the money starts flowing again people are going to act like they did before.
Some will have taken advice from here and made preperations but most will just 'wing it' again and there will be a lot of the same problems again due to basic human nature.
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Permalink Reply by R. C. Kidd on
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"...Who do we lease to now? ... Do you lease with the company that will provide you the greater bonus amount or do you lease with the most prudent operator?...."
How realistic is it to expect the company who signs our lease to be the company that drills the well? It seems likely that there will have to be some negotiations between developers to gain a contiguous producing unit and leases traded around until a producing unit is created.
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Permalink Reply by Henry, Landowner on
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I thought a little more about my forecast comment. I worked for a company most of my life that had a ten or twenty year forecast to guide it in making investment decisions. Oil and gas companies too have forecast to guide there investment decisions. When I make an investment decision I have a forecast in my mind. Some have been right some have been wrong, but I am always aware that I don't know the future.
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Permalink Reply by Les Bamburg on -
ON, there are really two issues regarding commodity price. International gas projects and oil projects are heavily tied to oil prices which are global in nature. The rapid decline in oil price has been primarily driven by the global recession (both fundamentals and perception). Because no one is really sure the depth and length of the global recession, it is unclear how long the drop in oil prices will be sustained.
US natural gas prices are driven both by the economy and, more importantly, the US natural gas supply and demand balance. Because supply is controlled in the US, natural gas producers have direct effect on how low natural gas prices will be driven. The general sense is the floor is ~ $6.00 per MMBtu for Henry Hub and the range will be $6.00 - $8.00 per MMBtu for the next 5+ years regardless of what happens on the global scale with oil prices. There is one scenario of LNG cargos being dumped into the US next summer that would further collapse the Henry Hub price but I believe this has a low probability of occurring.
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Permalink Reply by Oil Neophyte on
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Les:
Is MMBtu the same as mcf? If not, then what would a gas price of $6/mcf be in MMBtu?
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Permalink Reply by The_Baron on
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The typical caloric value of natural gas is roughly 1,000 BTU per cubic foot, depending on gas composition
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Permalink Reply by Grillin' - MmmMmm on
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roughly...kind of...well, not always.
Sales contracts for gas are always quoted in a $/mmBTU basis. I've worked with gas that sold at 865 btu per cubic foot and I've worked with gas that sold at over 1200. As you rightly pointed out, its all based on the composition of the gas and how it has been processed. Gas with a lot of heavy end hydrocarbons has a higher BTU content but generally this gas is processed to remove the liquids. This is done for a couple of reasons: first, the liquids generally sell for a higher price in liquid form than if you left them in the gas; and second sometimes the liquids are a problem for the pipeline hydraulics.
Also, any non-hydrocarbons in the gas will reduce the content. H2S and CO2 are two common non-HC gases. In small quantities, they are allowable in the pipeline but detract from the value of the gas. In larger quantities (larger being relative and still pretty darn small), they can cause massive problems and must be removed to meet pipeline quality spec's.
Most folks use the 1000 conversion factor but if you are being paid, you want to work from the proper conversion factor.
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to adjust to 15.025 PSI (La. Standard) from 14.65 (Texas Standard) divide the volume by 1.020027 to get actual volume
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I've seen some Louisiana companies pay on Louisiana wells using the Texas Standard - can cause civil unrest at Revenue as to the calculation of serverance taxes - MCFs in Texas not same as MCFs in Louisiana, all else equal, except for exceptions
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Louisian MCFs have more pep than Texas MCFs
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