Replies to This Discussion

Permalink Reply by Bobi Carr ("parker") on January 26, 2009 at 9:07

Don't forget that if they don't drill, that leases will expire.

But of course, they can drill verticals to hold by production.

And then the landowner can sues to release them for lack of paying quantities, etc.

It all sounds like an expensive chess game.

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Permalink Reply by Grillin' - MmmMmm on January 26, 2009 at 11:15

Not real expensive if they make a good vertical well. Cost to cover "paying quantities" is actually pretty small.

More importantly is the issue of getting pipeline capacity in here to get the gas to the northeast markets and better pricing. Plus XOM is sitting on $30 BBBBillion in CASH money! They can drill! Now, we don't want a lot of drilling right now as that will drive the price of gas down to nothing. We have a supply/demand problem...to much supply and demand is drying up as we speak. Export would be nice but the blockheads who run our country aren't going to go for it. And, there is a surplus of LNG around the world too as the recession is hitting everyone.

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Permalink Reply by Bobi Carr ("parker") on January 26, 2009 at 11:18

Mmmarkkk,

Have there been many good vertical wells?

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Permalink Reply by Grillin' - MmmMmm on January 26, 2009 at 11:22

Define good. 1-3 MMCF/day would qualify as a "good" well if all I needed to do was recoup my costs to operate. Now, a "better" well would be a horizontal well making a screaming 20mmcf/day, but in these times of slashed capital budgets and expiring leases, these guys are going to do what they have to do. And really, there's no reason to produce that 20MMcf/day as that will just run prices down further. Hang on to that lease and wait a year and then produce at higher prices.

Operating costs for a HS well are pretty low so paying quantities even at $4/mcf is still a pretty low number.

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Permalink Reply by Bobi Carr ("parker") on January 26, 2009 at 11:25

Mmmarkk,

Does a "good" vertical HS decline as quickly as a HS horizontal?

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Permalink Reply by Grillin' - MmmMmm on January 26, 2009 at 11:27

Probably not, but that's going to be speculation because we don't have a lot of data. The Barnett verticals didn't decline as fast as the horizontals, but the differences in rates, drainage radius' etc. make it hard to compare. But they do decline, but maybe not at 70% in yr one.

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Permalink Reply by Bobi Carr ("parker") on January 26, 2009 at 11:30

Mmmarkkk,

I have a friend that was drilled by Cubic. Their vertical was 173 mcf/d initial production.

I don't mind waiting for higher gas prices, but production like that isn't worth enough to buy a cup of coffee.

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Permalink Reply by Grillin' - MmmMmm on January 26, 2009 at 14:51

That is pretty cruddy but you know, it probably pays the bills to operate the well "in paying quantities". Assum 25% goes to royalty owners, that leaves roughly 130 MCF/d. Gas sells for roughly 4 in this area and it generally costs less than $1/mcf to operate a gas well in this area. Assumes they have other wells and infrastructure in the area. That leaves you $3/mcf or almost $400 per day in profit after expenses. Won't feed a multinational corporation but it is in paying quantities.

Permalink Reply by RAY on January 26, 2009 at 7:52

dont forget the ads Exxon had out recently about their stake in shale exploration

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Permalink Reply by LP on January 26, 2009 at 8:03

There was a financial news report on one of the cable news networks about an hour ago discussing the "need to IMPORT more natural gas from foreign countries". Yes...that's what they said. They talked about how much greener and cleaner NG is than oil and this country needs more LP tankers in order to IMPORT natural gas.
Now....other countries do have NG. Would they prefer to have us IMPORT their NG rather than America produce from it's own reserves ? YES. Could that happen ? YES. All our bright shinny new gas storage tanks could sit in the fields and rust like those of the past.

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Permalink Reply by BirdDawg, plain ole' idiot on January 26, 2009 at 10:38

LP,
That is very interesting. I agree, Why in the world would anyone with half a brain in the USA even talk about importing NG? Why don't they talk about maybe EXPORTING LNG?

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Permalink Reply by The_Baron on January 26, 2009 at 11:00

Fact: We import more gas now than we export. Most imports come through pipelines from canada and Mexico.

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