Mmarrkk

China, Shipping and the Great Commodity Carry Trade

Sorry, this linked article quotes Ben Dell. Mr. Dell's thesis was argued point by point and really made him look bad! One certain CFO mentioned that he mixed financial apples with cashflow oranges and came up with crappola!

Look at a few quarterly investor presentations and you'll see no one using $10. I've seen investment bank analysis that is in the 5-8 range to yield 10% IRR after tax. Again, I think $5 probably doesn't work but its not $10. Lots of billions of dollars being invested at $3.50 current gas and $6.50 strip. That tells you something! Maybe near term its about establishing/holding a lease position but the projects have to make money at the strip.


On Jun 05 01:21 PM Mark Anthony wrote:

> This earlier Seeking Alpha article by Keith Shaefer talked about
> marginal production cost of shale gas in better details:
>
> seekingalpha.com/artic...
>
>
> I think if you add every cost up, $10 to $13 is still a reasonable
> number for producers to be willing to invest money to drill the next
> shale gas wells, as there is investment risks involved.

China, Shipping and the Great Commodity Carry Trade

Mark: you obviously don't work in the oil and gas industry!!! I have over 30 years of experience and I'll tell you that TCF stands for TRILLION CUBIC FEET. MCF stands for THOUSAND CUBIC FEET, not to be confused with MMBtu which stands for million British thermal units, which is generally close to a MCF. And actually, most folks in our industry would use 6 MCF per barrel of oil. That's the standard used for converting gas volumes to BOE (barrels of oil equivalent) in annual reports, SEC submittals, etc.

Btw, in the oil and gas industry, M is used as an abbreviation for thousand, MM is million, B is billion and T is trillion. And Q is for quadrillion! Every now and then you'll find some folks using "K" for thousand, but they are in the minority. NEVER EVER NEVER will you find someone using "T" for thousand!!!

Please don't argue this point, as I'll lose all respect for your otherwise pretty good article! Any others with actual working experience in the oil/gas industry want to chime in on the nomenclature??


On Jun 05 01:06 PM Mark Anthony wrote:

> Mmarrkk:
>
> I get the $10 to $13 per TCF cost figure from something I read a
> while ago. I shall dig out the source and do more study on the cost
> of shale gas. But if you study quarterly reports of major natural
> gas producers involved in shale gas that will give you a better picture.
>
>
> It was correct for me to use TCF, Thousand Cubic Feet. When you say
> MCF you were probably thinking about MMBTU (A million BTU). One MMBTU
> worth of natural gas is approximately one thousand cubic feet. and
> that is about equivalent to 5.3 barrels of oil. Use this online energy
> equivalence calculator for the calculation:
> www.shec-labs.com/calc...

China, Shipping and the Great Commodity Carry Trade

Coolcoal: you don't mine shale gas, you drill wells, frac the crap out of them and produce the gas. Expensive stuff. Depending on who you listen to, cost to find, develop and produce shale gas ranges from $3.50 to $8.00 or more. The ranges are very wide and I think the real answer is somewhere in the middle. I disagree with the author on the $10-13 figure, but I do think its more like $5 or 6. Some operators are claiming less, but that's on a well-by-well basis, not on an entire program of drilling PLUS building out the infrastructure. Independent engineering groups are migrating to %5 or 6 so that's where I am.

And note to the author: I believe you meant to use "mcf" not "TCF" in the second to last paragraph. Really big difference!!!!!!

Bullish Signs from Oil

toobad41: while you are right that "most" gas wells produce some liquids, when you look at the revenue and profits of many predominately nat gas companies, >90% of their revenue/profit comes from nat gas sales. Check out CHK and HK. Oil prices don't really impact them, its nat gas prices, unless we have a good tight relationship between oil and nat gas prices which we haven't see.

Jimbo: not sure where to start with your post. On quickly changing tack from nat gas to oil, its a lot more difficult than you would think. When a company leases acreage/mineral rights in an area that is gas prone, they can't just snap their fingers and start drilling for oil. They've invest millions of dollars in a gas play and they just up and move to an oil play?? Don't think so. Your comments on PUD's are not reall factual, more of an opinion that for the life of me, I can't find any data to back it up. Perhaps you have some?? Since I've worked reserves accounting for years I can see PUDs being developed and moved to PDP all the time.

Bullish Signs from Oil

Quick question: how does a move in oil make for a move in EXCO, Range, etc? These are natural gas producers and while there is a correlation between oil and gas prices, that has been weak as of late. Natural gas is mired in a supply/demand imbalance that has only minimal relationship to crude.

Energy Roundup: Chesapeake Changes Its Plans

Well, lets see: at $4 nat gas, CHK will sell 72% of its production for $8.52. At $3 nat gas, CHK will sell 72% of its production for.....$8.52. All of the knock out hedges have been restructured and don't start hitting until late 2009 so gas would have to stay low until then for them to take effect. And they only represent 10% of the 72%.

So short answer: instead of making $2 B next year in profit, CHK may make $1 B IN PROFIT.

If gas makes it to $3, you'll see rigs cut to 1/2 of what is drilling now. Given the nature of the new Shale Gas wells being drilled, they lose 70% of their production rate within the first year of production. Without new wells to replace them, production in the US will drop precipitously. When we lose a few BCF/day in capacity, what do you think will happen to gas prices? Hmmm? While I doubt you'll see $3 gas, if it does come it will not linger there for more than a month or two and then go whipsawing back up. Nat Gas supplies are almost 50% made up of unconventional gas plays...meaning very very high decline rates. Stop drilling and the bottom falls out. Watch and see what happens this spring!

Natural Gas: Clean Fuel with a Dirty Little Secret

Why just look at Texas? Did you think to look at CHK's total company production? Across all states? They have been moving capital to other basins like the Marcellus, the Haynesville, etc. Look at their total production. It is increasing. But, if you would like, keep believing and even sell me your shares!!


On Aug 19 06:29 AM pacito wrote:

> Chesapeake is going to plummet. Simple reason for that: They are
> on the verge of experiencing Peak production. Just have a look at
> the numbers of Texas Railroad Commission.
> Statewide monthly gas well gas production for Chesapeake Operating:
>
> Oct 07 32.9 Nov 07 31.5 Dec 07 31.1 Jan 08 29.9 Feb 08 27.4 Mar 08
> 27.8 Apr 08 25.7 May 08 25.1
> So, production plummeted by 24% within 8 months. Within these 8 months
> NG prices surged from 6.17 (Q3 2007) to 11.34 (Q2 2008).
> Also: According to Texas RRC, output from the Barnett Shale peaked
> in Dec 07 with 3.07 BCF and declined to 2.61 BCF (May 08) so far.
>
> Shale NG is hot air, just declining too much.

Natural Gas: Clean Fuel with a Dirty Little Secret

Did you do a bit of research as to why LNG imports have fallen so low this year?? If you did you would understand a simple fact: even when gas prices in the US were $13/mmBtu, they were still lower than gas prices in the Far East (at $15 +). So why would a LNG shipper supply US markets with LNG for $13 when they could send it to Japan for $15?? That's the big secret (?). Until prices in the Far East drop or prices in the US rise, LNG imports will be severely reduced. Look at all of the new LNG import facilities that just opened this year. They aren't getting any LNG sent to them!!

Pennsylvania's Marcellus Shale: Welcome to America's Next Great Energy Boom

Several have. Results have obviously not been very good or you would have heard about it! It was one of the "stealth shale plays" being touted a few years ago. Think maybe it didn't work??

Pennsylvania's Marcellus Shale: Welcome to America's Next Great Energy Boom

I believe you will see the Marcellus start to slow down as regulators put the brakes on just a bit. Industry projections and stock analyst projections of growth are overheated. Getting water for frac's and getting rid of water are key issues. Bank it! I think all of the companies investing in the Marcellus will do very well, just not as well as everyone is predicting. Infrastructure, permitting and water will slow things down. Just wait and see.

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