Replies to This Discussion

Permalink Reply by dbob on January 5, 2012 at 17:07

Yeah, I'm watching things that would have moved forward at $3.50 crumble.  At least the drilling rigs will stay busy in the oil plays.  

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Permalink Reply by P.G. on January 5, 2012 at 17:31

Until they figure out a way to market NG for transportation it's doubtful prices will get any better...maybe if gasoline gets to five bucks a gallon folks will demand some kind of relief...

I doubt if exporting NG will do any good price wise considering NG is being found around the world now that fracking is becoming common place..

I think T-Boone had the right ideas...

Then of course if the government can figure a way to make it tough to frack...?

At least those with existing wells might see some real money..right?

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Permalink Reply by dbob on January 5, 2012 at 17:40

Continued new EPA rules on coal fired power plants and retirements of old plants will be the big difference IMHO - it will take about 3 more years for that to start making a dent in supply, and will be carefully planned to avoid pushing up prices too much.  

Transport fuel has about another 3-5 years before it starts making a difference - mostly a combination of new infrastructure and push for greater efficiency in long haul trucking.  If you can get trucking firms with a hedged price of say 3.50 mcf for 8 years, they'll make the plunge.  

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Permalink Reply by Hopeful About Natural Gas on January 5, 2012 at 21:24

Can anyone speculate if the average cost of a well in the Haynesville is 9 million then how much does a well cost in ....

Barnett?

Eagle Ford?

Marsallas?

Ohio Shale?

I just want to get an idea of our costs vs costs in other places.

thanks,

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Permalink Reply by Les Bamburg on January 6, 2012 at 3:48

Hopeful,

 

Barnett? -- $2.5MM

Eagle Ford? -- $7-8MM

Marcellus? -- $4-5MM

Fayetteville? -- $2.8MM

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Permalink Reply by Hopeful About Natural Gas on January 6, 2012 at 8:44

Les, thanks for the info - but, WHY are we so much higher than anyone else???  Is the gas deeper?

thanks guy!

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Permalink Reply by Les Bamburg on January 8, 2012 at 4:12

Hopeful, the Haynesville Shale is much deeper than most of the other shale gas plays and also higher pressure and temperature - especially in the southern areas of the play.  This translates to higher cost for drilling and completing wells including the fracture stimulation.

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Permalink Reply by essay on January 6, 2012 at 0:54

it's going to be really bad, probably for longer than 6 months, imho.  the surplus is enormous, and this is the first truly mild winter (so far) that we've had since shale production really started coming online.  even if it's hot this summer like it has been, we're still likely to go into next winter with an even bigger surplus.  what's it going to take to slash gas rig count?  sub $2?

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Permalink Reply by Les Bamburg on January 6, 2012 at 3:43

Essay, keep in mind that producers have significant gas hedges in place fro 2012 at prices of ~ $5.50/MMBtu.

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Permalink Reply by layla on January 6, 2012 at 4:21

That's nice for the gas producers, but from what I read in some of the pleadings for one of the suits against CHK, apparently their policy is to market "their" gas (the 75%-80% or more that is from a well) at the hedge price and then market "your" gas (the 20%-25% of the gas that represents the royalty payment) at whatever the going rate is.  If this is correct, then they make the $5.50 and we get paid on the sub-$3.00 rate.  Nice accounting, huh?

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Permalink Reply by Terry L. Antee on January 6, 2012 at 6:49

Dry gas rig count has gone below the wet gas rig count and is dropping. The problem is the associated gas with the oil and condensate wells.  The mild winter and the high cost of these dry gas wells and the $3.00 gas makes them uneconomical.   Remember you royalty owners when the gas price drops by 50% so does your royalty income, so higher prices helps us all.  Low gas prices help big gas users, it is supply and demand.

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Permalink Reply by Les Bamburg on January 6, 2012 at 7:31

Layla, that is the net effect but all the gas is marketed at the same price.  Hedging provides a separate revenue (or cost) that is not tied to specific production.  By the way, indications are that Chesapeake has very little hedging in place for 2012.  

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