Bloomberg: Gas is just a sideshow to U.S. producers prizing oil


Based on comments from energy company officials presenting at the Independent Petroleum Association of America conference yesterday, oil is still the prize and gas is almost an afterthought.

Abraxas Petroleum (AXAS) CEO Bob Watson discussed how much of his company’s proved reserves are oil and liquids rather than gas (74%), PDC Energy (PDCE) said it’s sitting on huge leases in gas fields that aren’t worth drilling and Whiting Petroleum (WLL) CEO James Volker explained that oil sells for 3x more than the equivalent amount of natural gas.

If natural gas is to be a bridge fuel from fossil fuels to clean energy - as Pres. Obama suggests - the transition can’t depend on supply alone; it needs more uses, writes Bloomberg's Issac Arnsdorf.

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Comments (10)
  • User 353732
    , contributor
    Comments (5161) | Send Message
     
    Wet gas is much sought after because of its valuable liquids content. Producers are wary of investing in dry gas until they see both LNG exports and Gulf Coast petrochemical demand increase materially. They are eager to invest in wet gas production.
    Producers now obtain about 65 to 70% of their revenues from crude plus liquids production and all high cash flow multiple independents are liquids intensive because that is where the rewards are. The division is not all natural gas versus crude but between dry gas and liquids.
    8 Apr 2014, 01:01 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11225) | Send Message
     
    Imagine all of the money that could go to elementary schools and local infrastructure improvements if the Feds would just get out of the way and let private sellers export NG.
    8 Apr 2014, 01:19 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1913) | Send Message
     
    Except the money likely won't go to elementary schools or local infrastructure.
    8 Apr 2014, 07:01 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11225) | Send Message
     
    That is exactly where tax money goes...
    8 Apr 2014, 10:51 PM Reply Like
  • Topcat
    , contributor
    Comments (580) | Send Message
     
    This is where government can play a role. Like mandating a transition of all government owned vehicles to NG over a reasonable period of time, and other such uses.
    8 Apr 2014, 01:24 PM Reply Like
  • Jack Wildcat
    , contributor
    Comments (218) | Send Message
     
    Mandating a transition of all government owned vehicles to natural gas? Seriously? I don't think so. Maybe the government should choose certain industries to succeed and give them tax breaks (solar, wind) while bankrupting cheap energy (coal). Thanks for the laugh, I needed that.
    8 Apr 2014, 03:38 PM Reply Like
  • badbernanke
    , contributor
    Comments (394) | Send Message
     
    The sales of US NG will be set up to have the gas priced at US prices for the US point of sale and the purchaser, an international intermediary, will resell the NG to the end users at the much higher offshore prices. There will be huge profits, not taxed by the US or states, thus not much in the way of school tax money.
    8 Apr 2014, 11:10 PM Reply Like
  • kmi
    , contributor
    Comments (4606) | Send Message
     
    NG is 50% cheaper than Oil on a BTU basis these days, not even including the less maintenance it requires on machinery.

     

    So of course producers are more interested in oil, you use more of it to perform the same work. Not to mention oil is far more transportable to markets of choice, which drives its high price, as it sells to the highest bidder as opposed to its domicile of provenance.
    8 Apr 2014, 01:27 PM Reply Like
  • badbernanke
    , contributor
    Comments (394) | Send Message
     
    NG is converted to oil at a 6:1 rate to convert NG to BOE on an energy equivalency basis. That is, it takes 6 mcfe of NG to be equivalent to 1 Bbl of oil.

     

    On April 1, 2014, with oil at $99.69 and Henry Hub gas at $4.37, NG cost only about 26% of oil on a btu equivalent basis. That is, NG was 74% cheaper than oil.

     

    This is one of the real inadequacies of oil companies showing mcfe or boe when stating reserves. NGL pricing is another factor that makes the energy equivalency meaningless as a measure of economic equivalence.
    8 Apr 2014, 11:18 PM Reply Like
  • kmi
    , contributor
    Comments (4606) | Send Message
     
    Great comment thanks.
    9 Apr 2014, 01:47 PM Reply Like
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