Replies to This Discussion

Permalink Reply by Cynthia Payne on March 7, 2011 at 1:12

And isn't all this production keeping natural gas prices down

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Permalink Reply by Les Bamburg on March 7, 2011 at 3:50

Cynthia, yes the continued growth in natural gas production and slow demand increases have created oversupply and downward pressure on natural gas prices. 

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Permalink Reply by Cynthia Payne on March 8, 2011 at 4:08

Do you think prices will continue to decline

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Permalink Reply by Les Bamburg on March 8, 2011 at 4:15

Cynthia, natural gas price (NYMEX monthly) may decline some over the next few months but should stabilize in the +/- $3.50/MMBtu range as it further displaces some coal demand in the power sector.  Most expect the gas drilling rig count to be reduced in the 2nd half of 2011 and this should result in some strengthening in natural gas prices. 

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Permalink Reply by P.G. on March 8, 2011 at 4:32

Perhaps this climate of sky high gasoline prices will initiate an organized push from   political leaders, nervous about losing their jobs, over to NG for a lower cost alternate to gasoline. That might set up a climate (hopefully) where speculators might take an interest in NG and push prices up....

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Permalink Reply by Cynthia Payne on March 8, 2011 at 10:26

It's a great thought and sure past time!!

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Permalink Reply by cocodrie man on March 8, 2011 at 10:10

I drove to the ENT in Baton Rouge today to get my new hearing aids.  Whilst driving in I though I  thought I heard a report on PBS (gotta believe what you hear there, right?) of an application to begin exporting U.S. natural gas.  There was talk of a five year ramp up to this, if the government allows it to happen.  Did anyone else hear this?  As noted, this was before my appointment at the ENT.

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Permalink Reply by Les Bamburg on March 8, 2011 at 10:25

CM, there are two proposed LNG export projects in the US.  The Sabine Pass project is located in Southwest Louisiana and currently is in the FERC filing phase.  The Freeport project south of Houston is in the FERC pre-filing phase.  The Cove Point LNG import terminal in Maryland is also considering the addition of export facilities. 

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Permalink Reply by cocodrie man on March 8, 2011 at 10:56

It was on Market Place by American Public Media

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Permalink Reply by Badfish Ranch on March 8, 2011 at 13:43

What I think is very important here is not the broad based rig count in gas, but where the rigs are drilling, a.k.a. quality, not quantity.

 

The Haynesville rig count peaked last summer in April and May, and has been dropping at a decent clip lately as rigs migrate out to other plays, either chasing wet gas or HBP operations elsewhere. This is important because with an average IP in HS of 14.1 MMBtu, it takes 4 rigs on average in other plays to equate to a single HS well. This worked backwards when the play started; every analyst under the sun predicted an imminent supply decline with such a sharp drop off in rigs. What we learned was what they coined as "rig efficiency", which is really more or less a fancy way of saying HS wells are off the charts in initial production rates.

 

So now that the great analytical world is touting this new found "rig efficiency" as the new normal, I think the next learning curve is when it is understood that Marcellus, Fayetteville, etc etc will not repeat the results of HS per well, information that is freely out there but somehow lost I believe or overlooked. I spent some time looking at the rig count in detail last week, and low and behold it would seem that Aubrey is practicing what he preaches (completing HBP and moving out for oil). Out of all the rigs they are drilling with, only 1 single rig was drilling a secondary well on an already held lease, all others are drilling well #1. Petrohawk had exactly zero rigs drilling a second well, 100% on HBP. With this activity rapidly maturing, I fully expect the HS rig count to continue lower in the coming weeks/months until some future point where the economics of cashing in such a large portion of the first year flush gas are far superior to the current pricing curve. These held leases are nothing more than future mining operations for cash, and will likely not be squandered until prices reward handsomely.

 

I strongly believe we will have lower production on 12/31/11 than on 7/1/11, even if the overall gas rig count remains at 850/900.

 

One other item worth mentioning is the Canadian imports we may see this summer. With oil prices running as strong as they are, Canada will be processing more tar sands for oil which uses quite a bit of natural gas; so even as we see some potential upticks in domestic production in the coming weeks, it will likely be offset by falling Canadian supply, so the year-over-year available supply will likely be flattish at best and demand a touch higher due to coal pricing already trading higher than last summers peak prices.

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Permalink Reply by Skip Peel - Mineral Consultant on March 8, 2011 at 13:50

The Haynesville/Bossier Play is morphing.

http://www.gohaynesvilleshale.com/forum/topics/haynesville-play-mat...

The best snapshot for the HA/BO Play is offered by the DNR at:

http://dnr.louisiana.gov/assets/OC/haynesville_shale/haynesville_wb...

IMO,the next phase of development of unconventional natural gas basins will be driven by the competition for markets.  Location, location, location.

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Permalink Reply by Sarah on March 8, 2011 at 16:45

Thanks for chiming in here Badfish. And Skip, thanks for the link to that other discussion. I didn't see it before. I just want the natural gas price to get better already!  Don't we all.

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