Liquid plays
I've read 4 investor presentations and I've listened to 2 conference calls and there is a recurring theme of decreasing natural gas production and switching to unconventional oil plays. CHK has stated they want to be 50/50 oil/gas by '12, eog reports they want to be 70/30 oil/gas, and Devon is reporting similar goals. It's strange because a year ago these same companies were selling the benefits of being a majority natural gas producer and now they seem embarrassed by the label but mention over and over their new oil finds.
What is the reason for this shift? Is it because these companies have just learned how to economically produce oil using horizonal methods? Is it that the price of NG is so low that it will doom the company if it doesn't diversify? Is this a hail mary attempt at preventing their companies from imploding or are these plays for real?
When asked about the Haynesville shale the response was pretty much the same by all of the companies and that was something like "we'll drill enough to get HBP but then we're out of there until prices go above $6.00".
So is the gas boom over?
What is the reason for this shift? Is it because these companies have just learned how to economically produce oil using horizonal methods? Is it that the price of NG is so low that it will doom the company if it doesn't diversify? Is this a hail mary attempt at preventing their companies from imploding or are these plays for real?
When asked about the Haynesville shale the response was pretty much the same by all of the companies and that was something like "we'll drill enough to get HBP but then we're out of there until prices go above $6.00".
So is the gas boom over?
Views: 139
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on -
keb, it defies logic that this would be an industry conspiracy to acquire your lease on the cheap. This is a logical, market-driven business decision. Crude and liquids will sell at a premium to natural gas for years to come. And no one can accurately answer your bonus question without a location and size of mineral tract.
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Permalink Reply by Henry on
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From Chesapeake's August 2010 Monthly Presentation:
"Reduce drilling of natural gas wells except for those required to HBP leasehold or to use a drilling carry provided by a JV partner until prices rise above $6.00" per mcf"
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Permalink Reply by ken hatcher on
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Comstock did say that one or two of their rigs would be going to Eagle Ford...17 unfracd wells due to shortage of pumping units in Haynesville, however I got the impression the sense of urjency was not that strong due to the price of nat/gas. Eagle Ford is where their leasing money is going. Comstock has 7 rigs running now.
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Permalink Reply by Les Bamburg on
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Ken, there is also leasing money going west to some new oil shale plays.
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Permalink Reply by Mary Alison Anders Knighton on
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No, the boom is not over only different...more costly... and there are other plays around the U.S. After this ordeal with BP and any new regulations that might be put on drilling ...in general....will effect Natural Gas. I think companies are looking to protect themselves. Our..the USA's..resources need to be discovered...and with new regulations, companies will go to an area that will make them the most profitable. With growth..new technology affords companies new and different way's to achieve the ultimate goal.. which should be to protect local resources and go thru with the intentions put before landowners. Again, this area is new..that's my thought.
Alison :-)
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