Seeking Alpha

Richard Zeits

 
View as an RSS Feed
View Richard Zeits' Comments BY TICKER:
Latest  |  Highest rated
  • Southwestern Energy: Big Opportunity Brings Along Big Challenges [View article]
    J Mintzmyer,

    50% sounds a bit harsh (would equal to almost $5 bn value loss). Besides, the market should already be discounting the offering. But it is hard to imagine a no-impact execution either.
    Jan 5, 2015. 06:18 PM | Likes Like |Link to Comment
  • Breitburn Energy Partners: One Cut Would Be Better Than Two Half-Cuts [View article]
    Coelacanth10,

    "...the daily price of oil doesn't mean much other than to foment panic in the markets. A wise investor would do well to ignore daily numbers and think in term of months or years."

    Do you think lenders think in the same categories? Debt is a two-edged sword. When oil prices are rising, it feels great to borrow at 5% to be the winning bidder in property auctions and corporate acquisitions. The feeling may be different, however, when oil prices start grinding lower and borrowing is no longer easy.
    Jan 5, 2015. 05:23 PM | 6 Likes Like |Link to Comment
  • Linn Energy: A Half-Step In The Right Direction [View article]
    mjk0259,

    I would not characterize LINN as a shale company. Their stated portfolio decline rate is 15% in 2015. Moreover, given that capex cannot be eliminated in its entirety, the decline is likely to be less than 15%, even if all the discretionary or low-return portions of the capex are eliminated.

    As I explained in the article, over-hedging is not an issue. Hedges are liquid and any unwanted portion can be easily monetized with the proceeds applied to debt reduction.
    Jan 5, 2015. 05:07 PM | 6 Likes Like |Link to Comment
  • A Giant Gas Well Confirms Deep Utica Potential [View article]
    John001,

    I totally agree with you. I would not take anything for granted yet. There are only a dozen wells on production and very little production history accumulated or reported with sufficient detail. However, as a starting point, these are undeniably very interesting results.
    Jan 2, 2015. 03:19 PM | 1 Like Like |Link to Comment
  • A Giant Gas Well Confirms Deep Utica Potential [View article]
    Hi TimeOnTarget,

    Great points. Unfortunately no further data from RRC on the frac job and I have not looked in databases yet. I agree, looks like a completion with reduced cluster spacing. Not a surprise - often, operators try to "put their best foot forward" when drilling their first wells in a potentially prolific formation and optimize the design for cost later.
    Jan 2, 2015. 11:57 AM | Likes Like |Link to Comment
  • At What Oil Price Do U.S. Shales No Longer 'Work?' [View article]
    Che,

    Personally, I would not pay $500 billion for 4 MMb/d of the existing production if it were the only asset. However, it is not the only asset.

    I wonder, what is the $500 billion estimate based on? I am not sure I buy it.
    Jan 2, 2015. 11:50 AM | Likes Like |Link to Comment
  • At What Oil Price Do U.S. Shales No Longer 'Work?' [View article]
    Mg10011,

    If no monthly check has been sent does not necessarily mean that there is nothing in the bank.

    The relevant question is how much "outside" cash has been invested and what assets does the industry has to show for that.

    If oil stays at $50, the investment may not be fully recovered. If oil stays at $70, the return will probably be hard earned. If oil goes back to $100, the shales are probably a jackpot for the industry, in the long run.

    However, oil price does not stay still. It moves around a lot.
    Jan 1, 2015. 10:52 PM | 1 Like Like |Link to Comment
  • A Giant Gas Well Confirms Deep Utica Potential [View article]
    Stag15,

    Very valid point. That's why I always say that one needs to watch the trajectory over 12 months or so (and preferably for a large enough sample of wells).

    The only well that has been publicly discussed with sufficient degree of detail is Rice's Bigfoot. That trajectory looks great so far.

    For sure, no test rate can hold for 12 months in a fracked well (unless it is restricted from day one). But if it could hold 10-15 MMcf/d over a year, similar to what Rice is expecting from the Bigfoot, it would be enough to make it a monster well.

    Range owes investors some details on the pressure drawdown, daily production profile, etc. as time progresses.
    Jan 1, 2015. 09:52 PM | 2 Likes Like |Link to Comment
  • At What Oil Price Do U.S. Shales No Longer 'Work?' [View article]
    Mg10011,

    I think there are several elements that you may have overlooked:

    - Incremental production has been added. Compare the 4 million barrels a day of unconventional light sweet crude production to what countries like Libya, Kuwait, OAE, Nigeria, etc. produce - it is a big figure. Existing production is a valuable asset worth a good amount of cash.

    - A massive resource base has been added. It does not produce cash yet, but it has been explored, discovered, evaluated, delineated and, in some cases, optimized. That may be a much bigger value than the current production.

    - Technology has been advanced (yes, fracking is complex, so is drilling)

    - Supply chain has been developed (with annual revenue equal to the size of annual capital spending - that is a big industry in its own right)

    - Infrastructure has been put in place (investments in liquids processing and petrochemicals alone are in the hundreds of billions at this point)

    I am not saying that investors are guaranteed to see their money back. Or maybe they will, and then more?
    Jan 1, 2015. 09:15 PM | Likes Like |Link to Comment
  • A Giant Gas Well Confirms Deep Utica Potential [View article]
    Mr. Miller,

    MWE is obviously the leader on the wet gas side. There are many others, particularly on the dry gas side. Many E&P companies are developing in-house gathering systems.

    The midstream will eventually be very well developed, given the incredibly high prices that upstream operators had to agree to. In fact, I am a bit concerned that takeaway will get overbuilt in some situations.
    Jan 1, 2015. 05:19 PM | 2 Likes Like |Link to Comment
  • A Giant Gas Well Confirms Deep Utica Potential [View article]
    Ericfp,

    GST has been on my to do list for some time, so hopefully soon. The collapse of oil price made some other topics a greater priority.
    Jan 1, 2015. 04:04 PM | 1 Like Like |Link to Comment
  • Chesapeake Granite Wash Trust: Stress-Testing At $50 Per Barrel [View article]
    Alex,

    In my opinion, future production should be reconciled to the latest reserve report with any adjustments necessary (total production over the life of the trust plus the monetized tail). The IPO projections are a bit dated, there have been several reserve revisions since then.

    With regard to the residual value at the Trust's dissolution, one could debate what it is, but with the faster-than-expected declines, that value is very levered to well performance.

    On NGLs, your comment is fair, I will try to incorporate some method to deal with it in my "next edition." Only ethane is a nat gas equivalent. Other NGLs typically have to be extracted from the gas stream to meet the spec. So in the short term, nat gas and NGL prices can disconnect from each other. In the long term, NGLs should be above the nat gas price, I totally agree with you.
    Jan 1, 2015. 03:40 PM | 1 Like Like |Link to Comment
  • A Giant Gas Well Confirms Deep Utica Potential [View article]
    John001,

    Lateral length data is available for the majority if not all most important deep dry Utica tests (in the note above, I included lateral lengths for four wells). Your point is exactly on target, one should probably measure performance on a per-foot of completed lateral.

    With regard to the over-pressuring data by well, I have not compiled it. However, it is not always readily available.

    Generally, there is hardly a tool that would allow to tell if a a fracture has closed up and why. But the general concept is that the pressure gradient that likely develops around the fractures in the event the well is allowed to flow too quickly can collapse fracture walls, damaging the completion irrepairably. Hence the managed choke program method.
    Jan 1, 2015. 03:22 PM | 1 Like Like |Link to Comment
  • At What Oil Price Do U.S. Shales No Longer 'Work?' [View article]
    Dr. Z.,

    Restricting flow early on during the well's life has been a fairly common practice in high-pressure and over-pressured formations. So the technique should be applicable in the low-price oil environment. Deferring new completions may be an even more compelling technique.

    For wells that have been put on artificial lift restricting production could be a bit trickier in some situations.

    The bottom line, production curtailments are not currently occurring not because of technical complications but rather because of operators unwillingness to curtail production.
    Dec 31, 2014. 05:38 PM | 3 Likes Like |Link to Comment
  • A Giant Gas Well Confirms Deep Utica Potential [View article]
    Hi Jack,

    Thank you for a great perspective. I think it is still very early to think about the EUR (or well cost) in deep Utica. The rate of pressure drawdown will obviously be key. Rice seems comfortable to communicate 20 Bcf as their type curve EUR. Still low by the offshore standards, but huge for the total cost that it takes to be developed.

    Of note, COG guides to 17 Bcf on average (!) for $7-$8 per well.
    Dec 31, 2014. 01:50 PM | 1 Like Like |Link to Comment
COMMENTS STATS
1,495 Comments
2,031 Likes