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Permalink Reply by Skip Peel - Mineral Consultant on January 4, 2013 at 9:59

Seeking Alpha

SWN: Unseasonably high natural gas inventories...

Friday, January 4, 3:53 PM Unseasonably high natural gas inventories going into mid-January support Sterne Agee's bearish outlook for gas amid what looks like another mild winter, as the firm suggests avoiding pure-play gas names such as Southwestern (SWN) and Ultra Petroleum (UPL). Only four companies have 40%-plus of 2013 estimated gas production hedged, the firm says: PXD, EGN, AREX, QEP.

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Permalink Reply by Frank on January 4, 2013 at 10:33

I compare the numbers with the graph depicted below them on the EIA report to get a sense of what they should be doing.  A 135 BCF decline is a big number, but now we are chasing the curve down hill and are on the cusp of the historic winter pull of gas seen as the slope of the maximum 5 year average decreases so it can more easily outrun the actual inventory declines.  Bigger draw downs will be in order for several weeks to keep pace.

 

Artic air is urgently needed through the mid to northeast US in order to support prices abouve $3 for long in my opinion.We are still well above the mean of the 5yr picture, but the big inventories are starting to affect those numbers to lower the slopes and bring them up as well.  See the prior year section of the chart to view the effect on data.

 

We're all in better shape, I think.  I just feel that filling out a timesheet is still in my near term future.

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Permalink Reply by Dion Warr, CPL on January 4, 2013 at 11:52

Group:

I'm not usually one for prognosticating, particularly as to something that is somewhat weather-dependent.  A cursory view of short-term and intermediate weather reports and precipitation chances, subsequent revisions, and the marked differences with actual conditions as they unfolded seem to point to the realization that at the moment, meteorolgists are at a lost as to being able to reasonable predict weather conditions more than one and a half to two days in advance at the moment.

 

That being said, these same climate modelers point to a slightly cooler than normal winter in the northern portions of the country in the next few weeks, with fairly wild winter weather mostly east of the Mississippi, at least for about the next 4 - 6 weeks.

 

What makes for a problem (in terms of upward movement of ng prices) is lack of snow cover in the upper Midwest and Great Plains.  While it usually requires cold (but not bitter cold) conditions to increase snow cover, once the snow cover becomes established, those areas tend to stay colder, longer.  Compared to some points earlier this winter, snow cover has retreated fairly significantly in those regions of the country, or has not held for more than short periods.  As far as heating, this points to erratic levels of consumption during the winter months, which doesn't generally point to a "run" on natural gas during the winter period.  One or two large regional winter storms would change this scenario, however.

 

Looking forward, it should not be forgotten what occurred in April of this past year, the report on which was featured again on the EIA webpage.  For the first time since EIA kept records on this statistic, natural-gas-sourced power generation achieved parity with coal-fired power generation in terms of total power generated (in miilion MWH).  This was achieved during normal dips of consumption following the winter cycle and prior to the normal upturn going into the summer cycle. , and as the EIA analyst put it "represents a structural shift towards using more natural gas for power generation"

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Permalink Reply by adubu on January 4, 2013 at 13:05

should we not begin to see many of the dry gas wells getting long in tooth with production declining althought all the wet shale liquids plays  are producing a lot of gas with liquids to balance it. I personal like hearing the EPA putting road blocks to drilling in North East so that decreases production upper NE and help us down south to be about to return to drilling some more dry gas wells in Haynesville if prices stablize in high 3-4 range. Operator can make money at 3.75-4.25 range.I take shale well now at 3.75 rather than my kids at 5-6 in 15+ years. So you say save it for the kids guess what that what my Daddy said 35 years ago when they sold gas at 25 cents -- save it for your kids at $2--- Well a lot of us were those kids and gas at 3.30 so drill baby drill ( Yes I know inflation has made 25 cent gas $3 today) But I take it

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Permalink Reply by Skip Peel - Mineral Consultant on January 4, 2013 at 13:35

Jan. 1 Haynesville report:  174 Wells, Waiting On Completion - 17 Wells, Drilling - 67 Wells, Permitted Not Drilling.

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

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Permalink Reply by adubu on January 4, 2013 at 15:33

Skip-- are well spud numbers stable last 12 months or still declining?

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Permalink Reply by dbob on January 4, 2013 at 15:51

Still declining in most of Louisiana and Texas - some stability due to liquids in Panola County

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Permalink Reply by adubu on January 4, 2013 at 15:55

Dbob --are numbers significant decline ?

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Permalink Reply by dbob on January 4, 2013 at 16:47

Year over year, they are huge.  numbers have stabilized some in the last quarter of the year, but at this point in the curve, even a single rig moving in or moving out is relatively big

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Permalink Reply by Skip Peel - Mineral Consultant on January 4, 2013 at 16:05

Click on my link above to see the state HA data for all of 2012.

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Permalink Reply by Two Dogs, Pirate on January 4, 2013 at 15:03

What about $0.04 in 1950.

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Permalink Reply by adubu on January 4, 2013 at 15:29

Two dog I think nat gas in 50s was simply flared

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