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!!!!!!