Natural Gas Goes Below $2 mmbtu - GoHaynesvilleShale.com2024-03-28T12:32:06Zhttps://gohaynesvilleshale.com/forum/topics/natural-gas-goes-below-2-mmbtu?x=1&id=2117179%3ATopic%3A3880209&feed=yes&xn_auth=noPoor labor productivity, risi…tag:gohaynesvilleshale.com,2020-01-23:2117179:Comment:38808252020-01-23T17:07:43.368ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<div class="td-post-header"><h1 class="entry-title">Poor labor productivity, rising costs plagued McDermott before bankruptcy filing</h1>
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<div class="td-post-header"><h1 class="entry-title">Poor labor productivity, rising costs plagued McDermott before bankruptcy filing</h1>
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<a href="https://www.businessreport.com/author/cburkes" title="Posts by Caitie Burkes" class="author url fn" rel="author">Caitie Burkes</a></div>
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<div class="td-post-content"><p><span style="font-weight: 400;">Poor labor productivity and rising construction and subcontractor costs are said to be what triggered the cost overrun issues that were plaguing McDermott International Inc. on two of its major construction projects, leading the company to submit a prepackaged bankruptcy filing that it says will eliminate more than $4.6 billion in debt.</span></p>
<p><span style="font-weight: 400;">It’s been two days since the Houston-based company</span> <a href="https://www.enr.com/articles/48410-contractor-mcdermott-intl-files-chapter-11-plan-to-cut-debt-fund-operations?oly_enc_id=6877B6136845J6A" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">announced it would file for Chapter 11 bankruptcy protection</span></a> <span style="font-weight: 400;">and go through a restructuring process, financed by a $2.8 billion debtor-in-possession financing plan that McDermott says will allow it to stabilize its cash flow, continue normal business operations and fulfill its commitments to all stakeholders. </span></p>
<p><span style="font-weight: 400;">Looming behind the filing: A $19 billion backlog of projects that McDermott inherited in 2017 when it</span> <a href="https://www.businessreport.com/article/mcdermott-completes-merger-cbi" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">acquired CB&I</span></a> <span style="font-weight: 400;">in a $6 billion all-stock transaction. (Previously, CB&I had purchased the Baton Rouge-based Shaw Group for $3 billion in 2013.) The move lifted McDermott’s debt burden to some $4.3 billion.</span></p>
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<p><span style="font-weight: 400;">The CB&I backlog includes two major liquefied natural gas construction projects—the Cameron LNG facility in Hackberry, Louisiana, and the Freeport LNG facility in Freeport, Texas—which, largely due to cost overrun issues, have further strained the company’s finances after years of low oil prices.</span></p>
<p><span style="font-weight: 400;">With this backlog, the company has had problems securing letters of credit, as it’s already reached capacity and cannot exceed the limit.</span></p>
<p><span style="font-weight: 400;">Louisiana shows one case where it’s been difficult for the company to maintain a timely balance between the cash it receives from customers and the cash it spends on projects. In 2014, a joint venture between CB&I and Chiyoda International Corporation was</span> <a href="https://www.prnewswire.com/news-releases/cbi-and-chiyoda-awarded-contract-for-lng-liquefaction-and-export-facilities-250681331.html" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">awarded a $6 billion contract</span></a> <span style="font-weight: 400;">to construct the Cameron LNG facility under fixed terms. The project was promised to create approximately 3,000 on-site jobs, as well as several hundred jobs at CB&I’s fabrication facilities in Louisiana and several hundred engineering and project management jobs in the company’s Baton Rouge office.</span></p>
<p><span style="font-weight: 400;">It’s unclear how many construction jobs—or local office jobs—have been created as a result of construction on the Louisiana facility, which is approximately 93% complete and now estimated to cost $10 billion. But according to some in the industry familiar with the phrase, “poor labor productivity” means McDermott thought its construction workers could accomplish more tasks in fewer hours than they actually did; in other words, the workers were performing less efficiently than management estimated during the bid process.</span></p>
<p><span style="font-weight: 400;">Is this a reflection of statewide construction job shortages or other labor force issues unique to Louisiana? David Helveston, president of ABC Pelican, doesn’t think so.</span></p>
<p><span style="font-weight: 400;">“Our indication is that this is company-specific, but generally the construction industry within Louisiana is well-positioned for the future,” Helveston says.</span></p>
<p><span style="font-weight: 400;">As for the rising construction and subcontractor costs (for which there is no estimated price tag), state economist Loren Scott says he’s “a little surprised” subcontractor costs would be going up, considering employment is down within Louisiana</span> <a href="https://www.businessreport.com/business/baton-rouge-industrial-construction-lull" target="_blank" rel="noopener noreferrer"><span style="font-weight: 400;">in the midst of a construction lull</span></a><span style="font-weight: 400;">.</span></p>
<p><span style="font-weight: 400;">“Normally when you’re in a lull, there’s decreasing pressure on subcontractor costs, not increasing pressure,” Scott says. “Last I checked, construction employment is down 10,000 jobs.”</span></p>
<p><span style="font-weight: 400;">It’s not the only cost overrun issue playing out in Louisiana, Scott adds, pointing to the recent $2 billion cost overrun for the Sassol project in Lake Charles, which resulted in the firing of two C-level Sassol executives.</span></p>
<p><span style="font-weight: 400;">“Is it a Louisiana thing, a company thing or what?” Scott says. “What’s going on here?”</span></p>
</div> Denver — In a first ever, Per…tag:gohaynesvilleshale.com,2020-01-23:2117179:Comment:38806962020-01-23T16:11:41.557ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>Denver — In a first ever, Permian forward gas prices settled in negative territory this week as the 2020 market outlook for pipeline capacity exiting the West Texas basin continues to deteriorate.</p>
<p><strong>On Tuesday, the April calendar-month contract was assessed at minus 2 cents/MMBtu.</strong> Forwards prices for May appeared to be headed in the same direction, ending the day at just 6 cents/MMBtu.</p>
<p>As the gas market continues to sour on the Permian, the balance 2020 forward…</p>
<p>Denver — In a first ever, Permian forward gas prices settled in negative territory this week as the 2020 market outlook for pipeline capacity exiting the West Texas basin continues to deteriorate.</p>
<p><strong>On Tuesday, the April calendar-month contract was assessed at minus 2 cents/MMBtu.</strong> Forwards prices for May appeared to be headed in the same direction, ending the day at just 6 cents/MMBtu.</p>
<p>As the gas market continues to sour on the Permian, the balance 2020 forward curve at Waha has lost more than half its value in the past month, settling at just 40 cents on Tuesday.</p>
<p>In the cash market, the steady rise in Texas LNG feedgas consumption has helped to buoy prices this winter, along with more recent gains in seasonal heating and power burn demand.</p>
<p>Month to date, spot gas prices at Waha have averaged 67 cents/MMBtu, S&P Global Platts data shows.</p> Ouch!
tag:gohaynesvilleshale.com,2020-01-23:2117179:Comment:38806852020-01-23T13:21:35.718ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>Ouch!</p>
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<p>Ouch!</p>
<p></p> The Waha hub was at $0.63 ear…tag:gohaynesvilleshale.com,2020-01-23:2117179:Comment:38807862020-01-23T03:55:31.617Zdbobhttps://gohaynesvilleshale.com/profile/dbob
<p>The Waha hub was at $0.63 earlier today. <a href="https://texasalliance.org/daily-market-information/">https://texasalliance.org/daily-market-information/</a></p>
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<p>Until Waha is at near parity with Henry Hub, there will be more room to fall. </p>
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<p>The Waha hub was at $0.63 earlier today. <a href="https://texasalliance.org/daily-market-information/">https://texasalliance.org/daily-market-information/</a></p>
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<p>Until Waha is at near parity with Henry Hub, there will be more room to fall. </p>
<p></p> I wonder what those 1992 well…tag:gohaynesvilleshale.com,2020-01-23:2117179:Comment:38806752020-01-23T00:13:26.750ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>I wonder what those 1992 wells cost to drill and complete? I'd say its a given that they were vertical wells producing from conventional reservoirs. The current average Haynesville well now costs between $7.5M and $8.5M, <span style="text-decoration: underline;">if everything goes right</span>. More than a few wells are in the $9M to $10M range especially on the deeper end of the play area.</p>
<p>The state currently lists 3357 "active" Haynesville Shale wells. The monthly report that…</p>
<p>I wonder what those 1992 wells cost to drill and complete? I'd say its a given that they were vertical wells producing from conventional reservoirs. The current average Haynesville well now costs between $7.5M and $8.5M, <span style="text-decoration: underline;">if everything goes right</span>. More than a few wells are in the $9M to $10M range especially on the deeper end of the play area.</p>
<p>The state currently lists 3357 "active" Haynesville Shale wells. The monthly report that listed DUCs has been discontinued.</p>
<p></p> I remember an old benchmark..…tag:gohaynesvilleshale.com,2020-01-22:2117179:Comment:38807752020-01-22T23:55:00.535ZGoRickyhttps://gohaynesvilleshale.com/profile/RichardMFoshee
<p>I remember an old benchmark... I had a deal sold to Samedan & I was supposed to meet their E. Texas geologist @ the Albuquerque airport to get the deal done. In Houston, I bought a paper to read on the plane. Front page - 'Natural Gas Hits 92 Cents". It's easy to remember, because it was 1992. Lets just call it 28 years ago. Gee - now we get DOUBLE for gas... while rents, salaries, vehicles, benefits, contractor fees, legal fees, drilling rig rates, costs of pipelines &…</p>
<p>I remember an old benchmark... I had a deal sold to Samedan & I was supposed to meet their E. Texas geologist @ the Albuquerque airport to get the deal done. In Houston, I bought a paper to read on the plane. Front page - 'Natural Gas Hits 92 Cents". It's easy to remember, because it was 1992. Lets just call it 28 years ago. Gee - now we get DOUBLE for gas... while rents, salaries, vehicles, benefits, contractor fees, legal fees, drilling rig rates, costs of pipelines & locations, costs of getting rid of salt water - - - - have done - what - in 28 years?? </p>
<p>What if the market would only bear a doubling of price on a pickup, a house, food, medical, medical insurance, electricity & on & on since 1992. Nobody would be selling these things, because the economics just don't work. Of course, TVs and the like are much better & remarkably cheap. So are other consumables and 'gotta-have-now-junk', thanks to the labor of genuine Chinese slaves. But - but - at what REAL cost, as measured by our huge trade deficits & spiraling debt?</p>
<p>I also would be interested in knowing how many Haynesville wells have already been drilled & are waiting on completion. Those wells probably would never have been drilled if the crystal ball told the truth as to how much gas brings & will bring for at least a couple of years.</p> I fear we are in for low natu…tag:gohaynesvilleshale.com,2020-01-22:2117179:Comment:38807692020-01-22T22:12:55.295ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>I fear we are in for low natural gas prices for the next four or five years. I hope I'm wrong but it is beginning to look doubtful that LNG export will be the savior we hoped for. No matter how much the demand increases, the supply exceeds it.</p>
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<p>I fear we are in for low natural gas prices for the next four or five years. I hope I'm wrong but it is beginning to look doubtful that LNG export will be the savior we hoped for. No matter how much the demand increases, the supply exceeds it.</p>
<p></p> Oh yeah, that's a given-but y…tag:gohaynesvilleshale.com,2020-01-22:2117179:Comment:38805422020-01-22T21:56:58.328ZGARY SHEFFIELDhttps://gohaynesvilleshale.com/profile/GARYSHEFFIELD
<p>Oh yeah, that's a given-but you are right</p>
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<p>Oh yeah, that's a given-but you are right</p>
<p></p> But only for so long! :-)
tag:gohaynesvilleshale.com,2020-01-22:2117179:Comment:38807622020-01-22T21:41:03.277ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>But only for so long! :-)</p>
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<p>But only for so long! :-)</p>
<p></p> Negative cash flow is better…tag:gohaynesvilleshale.com,2020-01-22:2117179:Comment:38806632020-01-22T21:35:58.597ZGARY SHEFFIELDhttps://gohaynesvilleshale.com/profile/GARYSHEFFIELD
<p>Negative cash flow is better then NO cash flow at all</p>
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<p>Negative cash flow is better then NO cash flow at all</p>
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