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Permalink Reply by Jack Blake on August 4, 2009 at 4:36

Jack Blake would like to say Natural gas prices will increase by early next year, but he would be fooling himself.
The problem with the glut is not just the economy or the HS. The problem is the worldwide oversupply, LNG and greater technology.
The technology made the HS production possible, but it also made many other things feasable.
Jack Blake hopes they do not drill a well in his section for many years. Jack Blake does not want a well until the prices are higher. Jack may be dead by then, but his descendents will see the $.
Long live the HS cried Jack Blake!!!!!

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Permalink Reply by Bobi Carr ("parker") on August 4, 2009 at 4:55

Long live Jack Blake!!!!

Hey Jack, the glut is nothing more than good advertising for using natural gas as transportation fuel. (If you build it they will come.)

hopefully......

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Permalink Reply by Grillin' - MmmMmm on August 4, 2009 at 6:02

Oh oh...I hope that Guru tag is tongue in cheek!! Guru on natural gas pricing is a pretty tough moniker! If I really knew what was going to happen in terms of prices I'd be rich and living in a non-taxation island somewhere in the Caribbean!

I'm kind of worried about prices over the next few months. Storage if filling up really really fast and within the next 2 months we could see storage operators telling producers to stop shipping gas. That will result in wells being curtailed/shut in. As that starts happening, you'll see near month prices starting to drop. How cold the winter gets, how many storms we get in the gulf will all help determine how fast we burn up the storage volumes and how quickly prices recover.

Really really long term (2011+) I think you'll see $6-7 pricing, maybe a bit higher; this will energize drilling the shales, but will keep a cap on prices due to exuberant drilling! In between 2009 and 2011+, I'd expect $4-5 in the early parts of 2010. I'm wishing for more, but don't want to bet the farm.

I'll be locking in my electricity contract for 24 months in about 2 months; that tells you that I think we are at all time lows, but I'm waiting a little bit as I think we'll see a drop. It wouldn't shock me to see $3.25 in September/October, but then again, $4 wouldn't surprise me either.

Hows that for a guru prediction? I'm heavily weighted towards cash in my accounts right now but do have some money in CHK, EOG, BP and CHV. Looking to add some HK if I can get a drop in price.

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Permalink Reply by Catfish on August 4, 2009 at 7:27

I figure as the price trys to rise so will production. There are alot of wells shut in just waiting. The Haynesville will continue to grow just to hold the leases. On a good note history has shown O&G has done a pretty good job of matching supply with demand. Hopefully they can manage this monstor gas field too. Any guess when we will see 4,6, or 8 wells per section?

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Permalink Reply by Parkdota on August 4, 2009 at 9:01

That's another thing that concerns me is that some wells are being shut in and are in the waiting. If prices do go up then they'll get opened up but I don't believe it'd take long to meet the demand at that point thus causing weak prices again. They've got to drill to keep leases in the play yet can't make a profit at current prices. So, something's gotta give. $7-$9 million on a horizontal well isn't cheap so I'm wondering how they're going to make it work financially? I'm sure they know something we don't and I'd love to know what. Encana alone is drilling 50 wells in the play this year with 75-100 projected for next. That's a ton of new gas. How can they make money doing that? Is it a case of darned if you do, darned if you don't bc they'll lose money if they let their leases go or loose money drilling so I guess they might as well drill and hope for the best?

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Permalink Reply by Grillin' - MmmMmm on August 4, 2009 at 10:10

Remember, these wells and many others in other basins have high decline rates. That's the big issue...gotta make up production losses.

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Permalink Reply by Henry on August 4, 2009 at 8:58

Mmmarkkk,
Rather than buying the producers, what about the pipeline companies?? What do you think of them?

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Permalink Reply by Grillin' - MmmMmm on August 4, 2009 at 10:09

Love them. I have some Enterprise, TEPPCO and looking at Kinder Morgan. Expect more fun with your tax return on the MLP's, though.

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Permalink Reply by Parkdota on August 4, 2009 at 15:59

The Henry Hub spot price averaged $3.91 per Mcf in June, which was 5 cents below the average spot price in May. Prices continue to reflect the disparity between weak demand and strong supply. Despite low prices, natural gas marketed production in the Lower-48 non-GOM increased by 1.9 Bcf/d (3.7 percent) on a year-over-year basis in April, the most current available monthly data. Although U.S. natural gas production is projected to decline over the coming months, historically high storage levels and limits to storage capacity may cause prices to decline further this fall. Prices are expected to recover in early 2010 as the market balance tightens. However, rising prices are expected to be tempered by improvements in the productive capacity of domestic onshore supply sources throughout the forecast period. The Henry Hub spot price is expected to average $4.22 per Mcf in 2009 and $5.93 per Mcf in 2010.

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Permalink Reply by Bobi Carr ("parker") on August 4, 2009 at 16:30

I know that Aubrey is trying to sell stock but here is what he had to say today:

OKLAHOMA CITY -- Chesapeake Energy Corp. CEO Aubrey McClendon said Tuesday that he expects natural gas rig counts and prices to rebound significantly within the next year.

McClendon said during a conference call with analysts that he believes by next August, natural gas prices will rise to between $6 and $7 and about 900 rigs should be drilling for the fossil fuel. That would be an increase of more than 200 rigs from current levels.

"There's a lot to like about 2010," McClendon said, although he predicted "a lot of wailing and gnashing of teeth in the next 60 days" within the industry concerning storage and pipeline issues.

"But after that you've got an improving economy," he said. "It's all shaping up to be a pretty favorable summer of 2010."

Natural gas prices have plummeted from a high last summer of $13.69 per 1,000 cubic feet to between $3 and $4 per 1,000 cubic feet. Natural gas for August delivery fell 5.4 cents to $3.98 per 1,000 cubic feet Tuesday on the New York Mercantile Exchange.

While demand for natural gas has wilted, reserves have increased, with the government reporting last Thursday that U.S. stockpiles are 18.8 percent above the five-year average of about 2.545 trillion cubic feet.

Chesapeake reduced its production for a time as prices fell, but the Oklahoma City-based independent energy company said last week it had boosted daily production by 4 percent in the second quarter over the first quarter and by 5 percent over the second quarter of 2008.

McClendon said that Chesapeake believes the industry "will be full up on storage by the end of the year" but company officials see no need now to curtail production. He said "pipeline pressures" will result in others in the industry undergoing "involuntary curtailments."

"There's no reason for us to curtail since everyone is going to be involuntarily curtailing soon," he said. "We didn't see any reason for us to take it on the chin for the team any more than we did."

Chesapeake reported Monday it posted a profit a year after it recorded a $1.6 billion hedging-related loss. But stripping out one-time costs, Chesapeake said profit was down from last year with gas prices off 70 percent.

Chesapeake said it made $237 million, or 39 cents per share, for the quarter ended June 30. Discounting one-time costs, Chesapeake reported $377 million in profits, or 62 cents per share, down from adjusted profit of $479 million, or 89 cents a share, in the year-ago quarter.

Revenue was $1.7 billion compared with a revenue loss of $455 million a year ago.

Analysts surveyed by Thomson Reuters expected Chesapeake to make 52 cents per share on revenue of $1.9 billion for the most current quarter. Those estimates typically exclude one-time charges.

Chesapeake shares rose 89 cents to $23.25 during afternoon trading Tuesday. The stock has traded between $9.84 and $51.10 during the past year.

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Permalink Reply by Parkdota on August 4, 2009 at 16:45

Thanks for the info....I hope he's right. I hope I'm dead wrong but I've got high $5's stuck in my brain for 2010. He did mention strong rig increases which still bothers me, though. From charts, graphs, and historical looks at the ups and downs of natgas it seems like it's a constant roller coaster. Things get better and everyone starts drilling which increases supply and lowers prices which curtails drilling and then they're back to square one. What really throws it for a loop appears to be a random recession and of course we've had a very bad one. I'm starting to think that the $13 they saw summer of 2008 won't be seen for a very, very long time. I think the enemy now isn't so much supply but the very poor demand internationally due to the deep recession. Maybe when most or all the economies get rolling again we can expect a solid natgas price.

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Permalink Reply by Parkdota on August 7, 2009 at 12:49

Here is a great read on prices and what moves them....

http://www.theoildrum.com/node/5323

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