Replies to This Discussion

Permalink Reply by Two Dogs, Pirate on August 9, 2008 at 14:23

Go back and look 2 years ago to the Dallas/Fort Worth Airport and the Chesapeake OGML of $10,000 per acre. What was the price of NG at that time?

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Permalink Reply by Two Dogs, Pirate on August 9, 2008 at 14:29

Jim, this is a roller coaster that we ride, who knows what will happen in the future.

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Permalink Reply by SharonB T18N R15W S8 on August 9, 2008 at 16:27

The Shale to Shining Shale report - found in the 50,000/acre? Haynesville shale thread, speaks to this issue. I believe from recollection, that the break even mark in HS was 4.25

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Permalink Reply by po boy on August 9, 2008 at 18:03

the number I heard was pretty close to that. Basically below $5.MCF the haynesville play is worthless again. Would cost more to extract than it would be worth. And our leases will again worth $10 and an RC Cola.

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Permalink Reply by Brenton Spence on August 10, 2008 at 15:37

Anyone who doesn't think that falling gas prices will have an impact on this play is fooling themselves....... when you couple this with rumors of "class action-type suits" being filed for fraud due to knowing "under-payment" of bonuses to unsuspecting mineral owners, it could add up to a quick slow-down in bonuses for this play.

Also, don't forget that the price to drill a well 2 years ago in the Barnett Shale was probably 25-30% lower than today's cost, due in part to the rise in commodity prices and the demand for rigs for these type of plays....it all adds up to another 1980's boom and bust scenario....and, don't think it cannot happen again...it can, and will, unless some stability shows up in the marketplace......when you add in the political hardballs that are being thrown at the O&G industry on taxation issues, it could get much, much worse....at least in the short-term, and some of those "hold-outs" may have to continue to do so in order to collect "top dollar".

The good news is that the Haynesville Shale appears to have the quality of reserves that will still be "preferred" over other similar shale plays, but it's important that prices stay high enough and/or costs come down.

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Permalink Reply by Les Bamburg on August 11, 2008 at 0:34

Waggoner, most companies base their strategic decisions such as leasing on longer term natural gas prices. Most believe there is a "floor" to the Henry Hub gas price around $7 - $8 based on the cost of alternative energy such as coal. The Haynesville Shale should remain competitive at this level of Henry Hub prices as development in other regions (Rockies, Canada, etc) would be cut back first. Just recognize also that wellhead prices for the HS will be $1 - $2 below Henry Hub prices.

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Permalink Reply by Les Bamburg on August 11, 2008 at 2:06

KB, generally the $1-$2 represents transportation and marketing costs and goes to interstate pipelines and gas marketing companies that are not affiliated with the O&G company. In reality the gas is not transported to the Henry Hub but rather primarily to end use markets in the Northeast, Midwest and Southeast. The Henry Hub is used as a benchmark or reference price when companies buy and sell natural gas.

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Permalink Reply by CR on August 11, 2008 at 2:36

When the winter gets here and more and more folks up north are switching from heating oil to ng, the price will go back up. Supply will have to meet demand. I for one think that ng will have a much greater market in the future than it has today. No one ever took alternative fuel sources, especially hydrogen which will be extracted from ng, seriously like they are today. T-Boone Pickens ain't spendin' all them millions on TV adds for nothin' folks!

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Permalink Reply by griiker on September 11, 2008 at 15:17

I doubt there will be a huge change from oil to Natural gas. In new england, the bedrock is to near the surface to make it economical to install Natural Gas lines much past city limits. Thats why heating oil is so popular in new england.

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Permalink Reply by Natch N3 on August 18, 2008 at 2:38

http://www.star-telegram.com/804/story/840294.html

Bad for producers

The combination has some financial analysts raising the issue with producers. For example, Chesapeake Energy Chairman Aubrey McClendon, after extolling the virtues of the company’s emerging prospects in Louisiana’s Haynesville Shale, brought up the subject during the company’s latest earnings conference call even before he was asked.

"Now before you become concerned about longer-term natural gas prices as a result of the sheer size of the Haynesville, please remember some likely natural constraints to the play’s growth," McClendon cautioned.

It’s likely to take several years to build the pipeline capacity to move gas out of the field, which itself should take decades to fully develop.

Constraints on new production and declines in older fields, "plus increasing demand from the U.S. power sector should be sufficient, in our view, to prevent a U.S. gas glut from developing."

EOG Chairman Mark Papa takes a similar view.

"We see the overall total Barnett field gas production peaking in 2009" at about 5 billion cubic feet per day, he told financial analysts on EOG’s second-quarter conference call. "Therefore, new resource plays will have to be the growth driver after 2009," he said, and he doesn’t foresee new EOG sources, such as its play in Canada’s Horn River Basin, filling that gap until 2011 or later.

"When you view supply growth in this context, the possible emergence of new domestic resource play is more digestible," Papa said.

found it interesting..
natch n3

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Permalink Reply by SharonB T18N R15W S8 on September 11, 2008 at 14:40

Here's a stock report on PXP - It mentions a method in which the O&G companies insure against volatile gas prices and I thought of this thread.

Plains Exploration Looks Strong

Posted Thu Sep 11, 01:01 pm ET
Posted By: Neil Malkin

We are maintaining our Buy recommendation on Plains Exploration & Production Co. (PXP) and increasing our target price from $84 to $91 per share. The company is poised for solid growth over the next several years with Piceance, Panhandle and Gulf Basin assets helping to drive production in a meaningful way.

However, the recent 20% acquisition of Chesapeake Energy Corp.’s (CHK) Haynesville Shale play will likely be the cornerstone of the company’s long-term growth story, as there are more than 20 Tcfe of reserves in place on its gross acreage. Additionally, the company has hedged a meaningful portion of its oil and gas production for '09 at favorable pricing, thus mitigating the risk of volatile prices.

We estimate that even if crude prices fell to $85/Bbl and natural gas prices fell to $6.50/Mcf, PXP would still realize oil and gas prices around $100 per barrel and $8 per Mcf in 2009, respectively. Based off of data taken in late Q2'08, we feel that on an enterprise-value-per-barrel-of-oil-proved reserves (EV/BOE proved) basis PXP is undervalued.

Its peer group averages approximately $22.50 per barrel of oil equivalent (BOE) while the company trades at an enterprise value of $17.37 per BOE proved reserves. Taking the peer average EV/BOE proved value of $22.50 with an assumed 600 MMBOE proved reserve base we arrive at a value of $91.00 per share. PXP usually has a forward P/E multiple that trades between 12x-14x while its peer group has a historical forward P/E of around 13x - 14x.

Read the full analyst report on PXP

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Permalink Reply by Two Dogs, Pirate on September 26, 2008 at 12:28

Plains sold to Oxy $1.25 billion worth of Texas and the Rocky Mountains and plan to concentrate their effort in the Haynesville play (WSJ 9-26-08).

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