applesauce

Unconventional Energy Still Attractive - UBS

Is that why BP has been paying billions for a 25% stake in CHK's deals. Short sided folks invest using todays numbers not taking into account what will happen when Russia cuts off Europe from fuel this winter and the growing likleyhood of Isreal dropping the mother lode on Iran. Fossil fuels are here for a long time and not getting cheaper to find and produce.


On Sep 06 09:18 AM AEB wrote:

> UBS' opinion is typical of analysts who know very little about the
> reality of the oil and gas business. $9/Mcf is not valid since the
> average spot price was $7.30 (Henry Hub) this week and plunging.
> The average U.S. wellhead price fell $2.30 in August compared to
> July to $8.32/Mcf and it will be much lower for September.
>
> At these prices, none of the great shale plays are commercial. That
> is why Chesapeake has been having a fire sale on its leases in the
> Haynesville, Woodford and Fayetteville shales. Barnett Shale production
> in Q2 2008 had fallen 20% from Q3 2007 before the fall in gas prices
> because of perceived higher unit prices in Haynesville and Marcellus.
>
>
> If drilling and leasing in the shale plays declines as it should,
> gas prices may rise but it will take a few quarters before this is
> felt.
>
> As an industry insider, I like natural gas plays but there are hard
> times ahead for the companies involved in the shale plays. They paid
> too much for new leases and deals when gas prices were high (Plains
> paid $30,000/acre in the Haynesville!), and are using borrowed money
> to drill. They all have huge quarterly debt service and hedging losses
> so far in 2008 (Chesapeake's long-term debt was more than $13 billion
> before they started selling, and the company is only worth about
> $3.5 billion).
>
> So I hope UBS is right, but it's hard to see what they based their
> positive opinion on. Does anyone think there might be something in
> it for them if a lot of people buy gas company stocks through them
> based on their advice????