Replies to This Discussion

Permalink Reply by smith1 on August 27, 2010 at 15:02

let's say prices are $3.60 now but petrohawk "hedge" is $6.00, and our well is producing, do we receive the $3.60 or $6?

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Permalink Reply by chilly willy on August 27, 2010 at 15:23

3.6

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Permalink Reply by Henry on August 27, 2010 at 23:04

smith1,
Your lease language did not entitle you to the hedged price. Read your lease, and that specifies the price to which you are entitled.

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Permalink Reply by Mac Davis on August 27, 2010 at 18:29

The hedges have the same value whether they actually produce gas or not. If they have a hedge that has a current value of $1.00 per MMBTU above spot price, they can sell the hedge for at least $1.00 on the financial exchanges whether they produce a corresponding unit of gas or not.

They may not think about it that way, or they may not want the public to think they think about it that way, but the math and finances work out that way.

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Permalink Reply by Les Bamburg on August 28, 2010 at 4:33

Mac, E&P companies want to be viewed as producers rather than financial traders by investors. That would make them speculators rather than hedgers and subject them to additional rules and reporting.

Also, realize that natural gas is generally sold on a monthly basis rather than the daily "spot" market.

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Permalink Reply by Bruce on August 28, 2010 at 13:45

Les B,

I have to concur with Gosh Darn, you are truly an asset here on GHS and I'm sure I speak for many when I say THANK YOU for sharing your expertise and experience with us. I have a couple of questions regarding your last post to this thread, you say we will not know how the U.S. stands on climate change until at least 2012, if republicans win big in November as many expect, won't that put a stop on any climate change legislation and give some sense of certainty to the industry by then? Also I realize you have said many energy plants are refurbishing or building ng powered generators which will increase demand, looking into your crystal ball, when do you anticipate this coming to fruition and we can see a steady increase in ng prices?

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Permalink Reply by Les Bamburg on August 28, 2010 at 18:28

Bruce, you may be right about climate change legislation being stopped but I think many in the industry believe that it will eventually re-surface. Some forms of climate change policy could actually be beneficial to the natural gas industry if it places additional cost on coal plants. Improving the run rate of natural gas power plants from 25% to 50% would add about 18 Bcfd of new demand and increase US consumption by ~30%. Without this action natural gas prices look to be capped at about $6.00 per MMBtu for the next 5+ years. The US needs a healthier economy for natural gas to attain this $6.00 per MMBtu level. If carbon cost were added to generators it would allow natural gas prices to rise to the $8.00+ per MMBtu range after 2015.

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Permalink Reply by MJS on September 2, 2010 at 8:27

Quote: "Some forms of climate change policy could actually be beneficial to the natural gas industry if it places additional cost on coal plants."

Let's say a form of climate change policy or some other form of Democrat lunacy could be beneficial to the coal industry if it places a cost on Fracking for Natural Gas? How does that idea grab you? How about United We Stand, Divided We Fall?
Climate Change is nothing more than a money grab. Other than that, it has no merit whatsoever unless you're a fruitcake like that the clown who recently highjacked the Discovery Building.

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Permalink Reply by Les Bamburg on September 2, 2010 at 8:32

MJS, do you just surf GHS to make political statements or do you actually want to contribute to positive discussions about the Haynesville Shale?

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Permalink Reply by Bruce on September 2, 2010 at 9:31

MJS, I am the person that asked for Les' opinion and if you will read carefully, I asked him when he thought natural gas power plants that were being built or refurbished would come online and thereby increase prices vis-a vis demand. I have tremendous respect for Les, he has time and time again answered people's questions and shared his expert viewpoints to my benefit and the benefit of all here. If I may try and interpret what Les was saying, you will see that he was explaining that sooner or later, some form of climate change legislation will be a reality. It is entirely up to us to make our viewpoints known so that any legislation will be favorable to our regional economy because, if we do not, the people in the coal-producing areas of the country will make their viewpoints known to their benefit, a natural and very human trait. I assume you agree with the basic tenets of this argument or you would not be a member on GHS. I urge you to contact your national representatives and share your thoughts with them but please do not come onto this site attacking other respected members such as Les. I would just like to close by publicly thanking Les for his help answering my many questions and to apologize to him for the abuse his thoughtful answers have provoked.

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