Mmarrkk

Shale Gas: Promises, Promises, Promises

Desert Fox: I believe the rapid decline in Total Texas Production is due to the decline in new wells being drilled. No one has masked the very high decline rates of shale wells. In fact, everyone admits and premises it! 70% in year one is a low end number but all are using this in their calc's. The key with the shale plays is continuing to drill in a manufacturing-type operation. I still think Dr. Berman's analysis is flawed. But confidentiality issues prevent from showing/discussing details.

Shale Gas: Promises, Promises, Promises

Tudor Pickering Holt gave a point by point assessment of Berman's evaluation. They, in short, said Berman is Flat Out Wrong and way out of his league. We shall see.

Energy Investing: Natural Gas Looks Especially Interesting

Laughing: I'd love for your scenario to come true but looking at production, demand and storage figures, we are still seeing way too much gas. The folks in the Haynesville and the Marcellus aren't cutting back on their drilling and the production glut is still where it was back in January. I see prices at $6 or so going into the winter of 2010!

Energy Investing: Natural Gas Looks Especially Interesting

Oh, my above comments aren't meant to be a slam on the recommendation of SWN...they are a great company and a screaming buy for the LONG TERM, but the premise given in the article is fundamentally flawed! Or at least tainted with ignorance on his part.

Energy Investing: Natural Gas Looks Especially Interesting

Marc:

You quoted that guy saying that SWN has a huge piece of LNG. Have you checked that out? I'm thinking that guy is completely wrong! I looked over their web page and found nothing even closely resembling a linkage to LNG other than the fact that SWN produces natural gas.

Since the guy is so completely off base and factually incorrect on such an elementary point, can he really be trusted as a financial analyst?? When all it takes is the worldwide web and a quick visit to a company's web page to do very elementary research (or maybe pre-school research), and this guy gets it wrong, then I'm guessing his credentials as an analyst are pretty shaky at best.

If I were you, I'd research the guys I quote in my article. This guy is out to lunch!

Natural Gas Should Get a Boost from China's New Demand

Freya: let me know when you get your DD complete and I'd be happy to provide add'l input as you reach conclusions. Since I work in the LNG business, I can certainly help out. The DD shouldn't be too difficult as all of these plants have to go through FERC certification and any export requires an export license. And, all of these plants are multi-billion projects, so they just don't happen and lots of planning, investing and press!

Natural Gas Should Get a Boost from China's New Demand

Freya: There is only one LNG liquifaction plant in the US and it is up in Alaska. It exports relatively small amounts of LNG and even that is being challenged by U.S. Congressmen.

All other LNG facilities in North America are re-gas plants where LNG is taken from its liquid form off of the carriers, converted to gas and shipped into our pipeline system for consumption. Chenierre requested approvals to re-export LNG...they take the liquid form into their storage tanks and then rather than gasify it for the pipeline, they turn around and put it back on ships in liquid form for re-export. Note that the LNG stays in liquid form the entire time. This is only helpful when your storage of liquid form gas is filling up. if not, why take the LNG off of a ship to begin with? Just redirect the ship to another port.

All of the above is a long way of saying that here in the Lower 48 and Mexico, we CANNOT take natural gas, liquify it and export it. We don't have the right facilities and it would take billions of dollars to build one. Its been looked at before and the economics just aren't there, particularly with all of the competition from Qatar and Australia. There is a plan up in British Columbia to take Canadian gas and liquify it for export. Long way away from building the plant, though, as the economics will be challenged.

Shale Gas Companies: All Talk, No Walk?

I find the quoted cash operating cost of $3/mcf extremely high. I think it is more like $1/mcf. Throw in $0.50/mcf basin differentials to HH and again that much for overhead and transport, you get to maybe $2.

Looking at some of the reported monthly production numbers for Haynesville wells, there are several that are averaging well over 10 MMCF/day for the first few months, not hours.

Plus, many of these shale players have gas hedged at $8-9/mcf through the middle of 2010. At the rate the wells produce, they can get the drilling costs payed out during this period of high hedged prices and when the go unhedged, they are only incurring the operating costs.

I think the shale model CAN work if folks get their costs down and avoid escalation in drilling costs.

What Devon's Huge Write-Down Means for Natural Gas

Paul: Cheniere's application is what Matgigem referred to...re-export of cargoes that were being stored in Cheniere's tanks. Basically the LNG is never "re-gassed"; it stays in its liquid state in a storage tank until it is exported back out. To truly get into the export business, one would need to build a multi-billion dollar liquification plant and there are already too many of those around.

BTW, there is a small scale liquification/export plant already built up in Kenai Alaska. Phillips, now COP, built it 20 years ago and its still working. But very small scale.

Getting export permits from the US will be very very difficult as most Northeast Congressmen do not want NG leaving the US; they want an oversupplied market to drive prices down for their constituents. Eventually that little game drives to gluts then shortages then gluts then shortages.

What Devon's Huge Write-Down Means for Natural Gas

Times are changing on LNG and the supply of LNG out on the open seas is getting r4eady to ratchet up. This LNG will find its way into the US market, mark my words. This will impact pricing in US. Expect LNG imports to top 3 BCF/day in late 2009/early 2010 vs 1.5 right now. Over supply and demand cratering in the Far East and Europe. If the Ruskies don't go all Rambo on EU markets. Plus all of the new plants coming on line in Australia will push Qatar gas out of the Far East and that gas has to go somewhere and the US is the place as it helps support their crude price linkages.

What Devon's Huge Write-Down Means for Natural Gas

To the author:

see my post above regarding LNG. You're missing it here.

Also, if you are "admittedly unsure if CHK uses hedges", I'm admittedly unsure if you should be writing articles concerning nat gas and companies that may have to take write downs. CHK is 82% hedged at prices over $8 for the rest of 2009 and 50% hedged for 2010. Kind of a key point, wouldn't you think if you are recommending investments in nat gas??

What Devon's Huge Write-Down Means for Natural Gas

Andy1234: You're missing the true story of LNG. The big problem is that over the next several months, there will be a lot excess LNG capacity in several places, like Qatar. While LNG may not appear to be competitive, you need to look at the incremental cost to run an LNG plant ONCE ITS ALREADY BUILT. The cost to produce nat gas in Qatar, liquify it, ship it the the US and re-gas it for entry into the pipeline system at the Gulf Coast is less than $2-3 per MCF. That is VERY competitive! Drilling in the Shales and producing has a break even cost of about $5, assuming a nominal rate of return. Once these massive LNG liquifaction plants are built and those $4 billion dollars are invested/sunk, the owner of the plant has a lot of incentive to operate the plant and generate cashflow as long as the operating costs are at least break even.

So don't discount LNG as too expensive. LNG imports will probably impact the US nat gas market a lot more than most think. With the downturn in Asia economies and the additional capacity being built in Qatar and Australasia, there will be lots of very cheap LNG hitting this market and it will suppress prices. It will also knock the teeth out of a lot of the more expensive US drilling projects.

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.

A Look at Earnings from Transocean and Devon

Thinking Ahead: the reason you exclude "losses" from hedges is that they are not really losses! They sold their production at $9/mcf but could have sold it for $10 had they not hedged. They did not "lose" a $1/mcf, they just lost the opportunity to make more. The whold financial accounting of hedges is ridiculous and that's why most everyone ignores losses due to hedges. Again, they didn't "lose" anything. On a cashflow basis they are printing money!