Skip Olinger

Plenty of Natural Gas: Exploration and Production Companies Keep Increasing Oversupply

Well done article but I have a question for you and the 2 previous commenters.

As I understand it, NG demand has fallen significantly primarily due to a drop in industrial demand and utility demand. Supply has increased as new unconventional plays have gone into production. So producers, who cannot just shut off wells like a light switch, have started to store gas in hopes of higher prices down the road. Storage is becoming full. Once full wells may be forced to shut down. Pressure in the system will fall so even pipelines won't be making revenue as no gas will be moving. Voila, end of the world. Do I have this correct?

But wait, if you want to sell your gas at say $4.50 rather than $2.73 all you would have to do is sell a futures contract for Dec delivery. That is 3.5 months away! There must be plenty of producers that have sold their production forward for winter delivery and intend of delivering. And, if you want $5 all you have to do is sell for June '10. What am I missing here?? I would appreciate some help.

Also, the economy seems to be turning around a bit. That should start to increase industrial and utility demand. How do you see that playing out??

Lastly, how do you see the Pickens theory play out with conversion to NG use away from Petroleum. I suspect that is a ways off but some government car fleets are now being converted?

Thanks to all for your help

Tiber Oilfield Spells Major Upside for Prices

Interesting and well done article. A couple of points:

1. Reserves do NOT represent the total amount of estimated oil in a given resource as "proven" by geologic assessments and initial drilling. In fact, the reserves of a given well or resource can change year to year on a company's balance sheet, regardless of new finds or depletion. This is caused by the fact the reserves are a function of the amount ECONOMICALLY recoverable oil. So, with low oil prices, it may not be economic for a company to lift the last bit of oil out of the ground. However, if oil prices rise, it would be economic to make extra investment in the well such as injection and recover the last bit of oil. In this case, the company's reserves would increase even though no new oil was found in that well. I recently learned this distinction in talking to a domestic E&P company.

2. Another point about Peak Oil, not only does the rate of production decline after reaching Peak, the cost of recovery goes up. To get the final bit of oil from a well requires injection and other techniques, which add to the cost of recovery. Another point is that most of the easy oil finds and recoveries have been made. New oil discoveries are being made in areas where recovery is difficult and expensive.

Is There Enough Natural Gas?

Buddy, you seem a bit short on facts yourself. Rather than waste space and reader time with your less than clever retorts, why don't you start writing intelligent, well reasoned articles. Like the good republican I am sure you are, you spend all of your time condemning people without offering alternatives. I suggest that you spend a few days writing an article supported with facts (maybe even include a cite from a professor or two) about why we should continue to remain dependent upon foreign oil, burn more coal, and increase CO2 emissions. Your comments are unhelpful, not intelligent and written only to improve your opinion about yourself.


On Apr 30 03:20 PM ArtfulDodger wrote:

> My Dear Fitzy:
>
> You wrote: “one thing we both can agree on is that i wouldn't get
> far convincing you.”
>
> You are looking at me through your own eyes. Take a break; don’t
> be so defeatist. It makes me think you could be mentally lazy. For
> you can certainly convince me—that is, if you present a proper argument
> with well-presented facts in a well-written and well-reasoned paper.
>
>
> But you don’t have to convince me. You have to convince literate
> people who’re used to taking advice from people who know how to present
> it properly. Although, as I noted, this most recent article is far
> above your previous ones, you’ve still not presented a proper argument
> for all your positions.
>
> Whoever edited this article for you, get them to continue helping
> you. If you did it yourself, keep working on your writing, and perhaps
> before we run out of oil, you’ll be an argumentative writer of the
> highest import.
>
> You see Fitzy I like people who are passionate about what they're
> doing and also honest. And on these two points—as best I can tell—you
> get an A+.
>
> And so, just as you've put it on yourself to save the whole US, all
> I want to do is help little, old you a tiny bit. And again, as I've
> noted, with the lofty goal that you have, you need lots of help.
>
>
> Indeed, leftists are very sensitive people and almost universally
> refuse to listen to anybody except people who present them with negatives.
> They want someone to agree with them or they immediately begin slandering
> such folks or grouping them with someone all leftists hold in total
> scorn, such as Rush and Bush.
>
> Do you really think you're going to get anywhere by bashing Bush?
> Or even Obama. So, leave out the personal pejoratives.
>
> I don’t like Big Oil either—not for the same reasons you don’t, but
> nonetheless, I don’t like them. But when you toss a shot in a paper
> against them, you’re only throwing meat to the eco-maniacs. No one
> else cares. So, leave out the industry slanders—no matter how sly
> they are.
>
> Moreover, you’re going to need both political parties to achieve
> your goal of turning America into a natural gas grid. So, leave out
> your politics.
>
> The way I see it (and others should comment in this vein), Fitz,
> you have three things to prove to move the nation in your direction:
> 1) that NG is the best way to go over all else; 2) that C02 is a
> serious pollutant; 3) that “peak oil” is real and the world is headed
> down that hill already.
>
> You can’t simply say that C02 is a dangerous pollutant, Fitz; you
> have to show that it is, for merely because you have it in your mind
> that it is, does not mean most of the rest of the nation does. <br/>
>
> And you can’t simply say, Professor X says C02 is deadly and that
> the planet can’t last much longer if we don’t control it. We’ve all
> heard those tales before. You have to show how C02 is detrimental,
> what it’s already done, and what it may do in the future. Show! Don’t
> tell!
>
> As far as arguing for NG, you did a good job toward that end in this
> paper, but I’d consider it a rough draft. I hope you’re not firing
> your articles out to members of Congress and the Senate, or other
> people who have readers filtering their mail. For as soon as they
> see the bad transition, paragraphs stacked with multiple subjects,
> the unsubstantiated claims, and your punctuation, they’re not going
> to send your papers upstairs to the boss. They're going to get tossed
> pretty quickly.
>
> I don’t mean to talk down to you Fitz, but just as I am not an engineer
> and would need your help in that area, you are not a writer—and that’s
> where you need help if you’re ever going to get anyone on your side
> powerful enough to help you.
>
> You do certainly write, but you are not a writer, especially of the
> type you need to be, say, on the order of Rachel Granby (SA editor),
> whose writing is perfect—to say the least about it. She’s an editor;
> perhaps she would look over your papers for you.
>
> Writing is a series of processes that literate humans use to produce
> a product that enables them to communicate with others. So then,
> punctuation, syntax, transition, grammar, spelling, sticking to a
> subject, and editing are all required to complete the writing process.
>
>
> Writing is an acquired craft, Fitzy. And you’ve not yet acquired
> it to the point that you need to so that you can save our great nation.
>
>
> Hey, it’s not too late, Fitzy. You’re an intelligent, passionate
> person. A little cynical—but you mean well. Loosen that stiff neck
> of yours a mite, humble yourself, and get to work.
>
> That’s my bit to help you, and I hope it does.
>
> The best to you and to your effort to change the nation for what
> you see as the better.
>
> If you stay passionate and honest, others will come along who're
> much much smarter than I am (and that doesn't take much!), and they'll
> be able to help you moreso than I.
>
> But you have to be ready with an excellent product to present to
> them.

Is There Enough Natural Gas?

What a pathetic post.


On Apr 27 10:30 AM Ferdinand E. Banks wrote:

> Hmm. I like to see this kind of work. Too many mediocrities working
> in energy for my taste. But even so I know a couple of things that
> bother me when reading this article. I'm thinking of 'FUELING HALF
> OF ALL US TRUCKS AND CARS WITH NATURAL GAS, AND REPLACING 50% OF
> COAL FIRED PLANTS WITH NATURAL GAS. 'That may sound good, and make
> sense from the point of view of chemistry, physics, biology, political
> science, witchcraft and gender studies, but from the point of view
> of energy economics - and the leading academic energy economist in
> the world, as I occasionally call myself - it is very very wrong.
>
>
> Then why don't I produce some numbers which show that it is wrong.
> Well, as a Canadian billionaire once said, we are living in the most
> dishonest period in history, and so I belong on the sidelines. But
> I will say that ANDY has the right idea: flow rates and possible
> flow rates tell a very different story from inventory values. And
> by the way Mr Nieder, Germany had some of the highest electric prices
> in Europe, and given their grotesque belief in wind I doubt whether
> it has decreased.

Is There Enough Natural Gas?

Very well done. Nothing like a big dose of algebra with my coffee.

You did not mention NG imports from Canada. We import not an insignificant amount now, I believe. We also import LNG. This would add life and availability to the equation.

Al Neider's comments were interesting. Are you going to investigate?

Natural Gas Companies Increasingly Important

Marc,
You are long on opinion and short on detail here. How much cash is APL getting from Williams to pay down their debt? Is not the goal to pay down debt to avoid covenant breech? I see no mention of that. How did you or your mentor come up with $400M for the sale of NOARK? What effect on Adj EBITDA will that sale have. NOARK is one of their few assets that generates revenue from fee or toll contracts so the sale further exposes the company to commodity risk. And, could you please enlighten us all as to why your favorite pick of all the NG transportation companies is APL? If you like transportation and distribution, why on Energy Transfer or Enterprise Products. They are bigger, not in financial peril. They make much more of their revenue from fee based contracts, not keepwell contracts. I have to be blunt here in the interest of trying to keep high quality analysis on SA; I don't care about your "feelings" about a company. I am interested in hard analysis as to why APL is now a deep value play with little downside risk and very large upside. I see nothing here that tells me how and when APL will raise sufficient capital to pay down debt to avoid default. It won't matter how much they earn if the bank defaults their loan. This is an interesting story so do some real analysis before you publish. There is no value in putting up a piece that tells readers to look at the company's powerpoint.

Your Oil Stocks Aren't Coming Back

You don't seem to address the fundamentals of peak oil or the ability of suppliers to bring production into balance with demand. This was not a well reasoned article and forgive me, but a good example of the worst side of SA.

America Needs a Natural Gas Transportation Infrastructure

PLEASE CHECK YOUR MATH. WE APPEAR TO HAVE A SHORTFALL BETWEEN US PRODUCTION AND US CONSUMPTION. IS THIS CORRECT?

Very well done article and many relevant and thoughtful comments.

I think you have some math errors at the beginning of the article. You say the US gas production in 08 was "1,700,000 cubic feet per month", which would equate to 56,667 cubic feet per day. I think you mean million cubic feet. Based on the embedded consumption chart, the US consumes 63,143,093,151 cubic feet per day (total consumption x 1M / 365). That is a pretty big imbalance.

However, if US production really is 1.7M MMCF per month, not CF, then we still have a shortfall in production - 56B produced and 63B consumed. Where to we make up this shortfall?

I plan on emailing your 5 point natural gas plan to Obama and Peolosi. I think there is a chance Obama may doing something proactive and positive with energy planning

Geopolitical Energy: Centered on the Caspian Sea (Part 2 of 2)

Thanks for the response. Is there a way to get in touch with you out of this forum to discuss fly fishing and alternatives to living in CA?


On Jan 06 12:59 PM Michael Fitzsimmons wrote:

> john s. gordon: the iranians took hostages because they were tired
> of the CIA and the US installed shah ruling their country. let's
> switch the roles for sake of debate. let's say the US had no nuclear
> weapon, and china invaded mexico and canada and installed a ruler
> in the US. what would our response be? we'd probably overthrow the
> ruler and start working on a nuclear bomb. right? it's all action
> and reaction, and it's all based on US military imprerialism and
> agression in the middle east and central asia in order to satisfy
> our foreign oil addcition. the unholy alliances the US has made with
> terrorists in the past (shah of iran, sadam hussein, bin laden, uzbekistan
> dictator, i could go on and on), is quite simply a failed foreign
> policy, and will fail in the long run as an energy policy. imho.

>
>
> skip: wrt GLD, i suppose it's ok short term. in the long run, my
> paranoia about the financial markets leads me to want to buy and
> hold the gold coins in my hot little hands. sure the coins have a
> mint premium, but that premium holds fairly constant as the price
> of gold goes up and down, and also holds if you want to sell them.
> wrt pipelines and MLP's, i agree with you - there are some great
> high yielding opportunities there, and i kick myself for not buying
> more of them in late december. wrt COP, everything i read is that
> the relationship COP has with lukoil and the russians is very symbiotic
> and beneficial to both partners. COP brings technology and management,
> and obviously russia brings the resources and manpower. from what
> i have read, COP and the russians want to expand their cooperation.
> i like the relationship - it goes to show what can happen if americans
> are so damn arrogant. the russians even made statements to the effect
> that COP CEO Mulva (i think the best CEO in the oil patch) wasn't
> arrogant like most big oil CEO's. he's regarded as a problem solver.
> anyhow, you are correct to point out the risk, but looking at COP's
> price, it appears to be priced in. COP was not long ago selling at
> a price in which the yield was about equal to the PE (!). i still
> think COP is a strong buy. thanks for the comments.

Geopolitical Energy: Centered on the Caspian Sea (Part 2 of 2)

Well done article. Regarding physical possession of gold, the only problem is that you have to buy coins at a large premium to the quoted price per oz. I doubt the world will come to an end so what is wrong with owning GLD?

I would also buy domestic oil and gas and some pipelines. While the US is the 3erd largest oil producer in the world, we consume about 3x as much as we produce, which is way above any other country's consumption. I doubt we will be able to significantly eliminate oil from our economy any time soon and I doubt conservation efforts will reduce the price of oil on a permanent basis. Therefore I think we have a unique opportunity to buy some really beaten up companies and MLP's. With the MLP's, if I am wrong about how soon oil and gas prices rebound, you get paid to wait. I own LGCY, LINE, ETP and ETE. I would also look at XCE in addition to the majors. I would concentrate on the company's balance sheet and be sure they have committed lines of credit for the next couple of years. Commodity prices are occasionally very volatile so you want to know the company has adequate funding.

While I own COP, i am very nervous about its stake in Lukoil. It could be confiscated as well.

Your thoughts?
Best regards,
Skip

U.S. Oil Supply: Drilling Down to the Facts

Your math is correct. Also, if you add up each country's percentage it is only 81% not 93%.

I think that the US imports 65-70% of its 20.7 MMbbls per day oil requirement, which would be 13.5 to 14.5 MMbbls per day


On Dec 17 11:02 AM Bob Belsito wrote:

> I could not follow the math. Help me out here.The author states that
> we
>
> import 13.5MMbd and then lists 15 nations from whom we import

>
>
> 9.3BBpd and says that represents over 90% of our imports when

>
> in actuality is is closer to 69%??????
>
> What am I missing here. It also appears that his article suggests

>
> that we import about 60% of oil used. Is that correct?

Looks Like It's Time to Buy Oil

It would be helpful and add to your credibility if you would provide support or explanations for your numbers. It sounds to me like you are making them up based on your gut feel. How do you know COP is a buy in the $40's? This was not a very useful article

15 Value Hedge Funds - Portfolio Update

I guess I am dumb like you. I think seeing what some pretty bright people are buying and selling is a pretty good place to get ideas to do my own research. It also provides a good benchmark to compare to my own portfolio.

You should do some further research on whether Buffett sold COP. I saw another post that he, in fact, got an expemption from the SEC to not report is position in that stock. Therefore, it simply droppped from the list and not sold. Given that COP is pretty cheap compared to the rest and that he and Gates were up in Canada looking at oil sands, it seems unlikely that he just punched out of this position in one quarter