Replies to This Discussion

Permalink Reply by Les Bamburg on June 17, 2009 at 12:49

CB, have you priced a CD recently? You're lucky if can get 1.5%. I have "worked the numbers".

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Permalink Reply by Les Bamburg on June 17, 2009 at 12:52

Mmmarkkk, just keep in mind the significant LNG imports in 2010 unless the Asian economies start to recover. Demand recovery in the US is still the wildcard and will be the main determining factor.

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Permalink Reply by w.r. frank on June 17, 2009 at 11:39

Why does everyone on this site ignore the published return projections in the presentations from the E&P companies as to the returns at various NG prices and EURs. There are liabilities in the securities markets and it is just a mathematical calculation once you put in assumptions for IP, decline rates, LOE and NG prices.

I agree with Mark that lease costs are "sunk costs" when an E&P company makes a decision to drill or not. However, if your take a lease costs of $5,000/acre(HK's)( even though CHK's is negative because of the PXP JV, EXCO is really cheap because 75% is HBP with CV production and ECA/SWEPI is very low). BUT, using $5,000/acre, IP of 10 mmcfd. decline rates of 80%, 30%, 25% and 8% to terminus, LOE of $.25 mcf (HK says $.10 for first three years), NG of $6 (check the 2010 strip which is over $6), you get 7.1 bcf EUR and a pre-tax IRR return of 48%.

WHAT is wrong with a pre-tax return of 48%? Do all the experts on this site quoting unnamed analysts think HK, CHK, EXCO, EOG, XTO, ECA, SWEPI, and STR DON'T know anything about the NG business and are frittering away $3.5 Billion of stockholder money in 2009 drilling uneconomic wells.

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Permalink Reply by CB on June 18, 2009 at 1:30

If you believe everything these companys say, I have some swamp land in Plaquemines Parish I want to sell you. You think Enron and AIG told you everything. These companys are playing up everything to the extremes( decline rates, EURs,operating costs-$.25 BS I pay more than that with insurance, pumpers, ad valorem tax, SW disposal, severance tax, admin, repairs, and a million other things ). I would too, to drive up the stock price. Lease costs are sunk costs, but still go into the bottom line of profitability. Strip doesn't mean anything, it's what you actually get at the time you sell it. They are losing $ on every well they drill at Today's $, and will pay for it in the future

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