Wildhorses

Natural Gas Is Heading to 1997 Levels, Should Stay There Awhile

Buck,

Nice work, but there are many things that I think you simplified too much. Shale plays like the Barnett, Marcellus, etc. are not all just sure bets - drill a horizontal hole and produce. Sure, much progress has been made with horizontal drilling and frac techniques. But, some areas of Barnett are great - some not so great. Marcellus is too new to know how prolific it will be - but it is not as simple a program as the estimates will have you believe. Some of the Marcellus is highly fractured while other areas are much tighter. You'd think fractured would be good, but early results (not published) have suggested otherwise.

Another problem with shale plays is that they do indeed deplete at a much faster rate than the old traditional deep or tight gas plays. A few years ago, first year deplection rates were in the teens. Now, with so much shale production, 1st year depletion rates have been estimated to be in the mid-30's. So, if the drilling rig fleet drops from 1700 to less than 1000, the depletion rate will effect production much more than in the past.

You also make a good point about lower prices forcing out the marginal producers. One of the reasons that the rig count was so high was because of the high rates. Every geologist and his friend suddenly decided to drill a well. Heck, 3 guys on my block were drilling personal wells as recently as 6 months ago. One is still going at it today.

You are correct, many wells have been shut in and can be brought back on. Usually this is not a simple valve opening exercise. The wells that some workover effort to get things up and going. And, you can bet with the low prices, producers will take a long look at the market outlook before they make the effort to open up the spigot. Will LNG really be able to make a big difference once supply/demand come back in balance? Maybe, but when prices were high a year back, the US actually imported less LNG than the previous year because the other markets were willing to pay more than the high US rate.

Again, nice analysis, but I think there are a number of moving parts in this puzzle that don't make it out to be as simple as it sounds. You've probably guessed by now, but I've place my bets that the price is going up. For disclosure purposes, I hold CHK, APA, UPL, APC, XTO, EOG, DNR, DVN.

Dendreon Troubles Beyond Provenge Test

On Apr 16 06:00 AM Michael Murphy wrote:

> Do some simple modeling starting with the number of prostate cancer
> patients, the likely revenue per treatment (about $50,000) and the
> percentage of patients likely to choose Provenge over Taxotere or
> nothing. I come out with Provenge as a $1 billion drug for the approved
> patient population, with $1 billion in revenues discounted to about
> $25 a share for DNDN today. Now add off-label use for earlier stage
> PC patients - that's another billion. And Dendreon is going to sign
> deals in Europe and Japan - that's another billion on label and a
> fourth billion off label.
> Dendreon will restart their breast cancer and head & neck cancer
> trials, and succeed. Also colon cancer, stomach cancer and several
> other solid tumor cancers. Let's call breast cancer another $4 billion
> on and off label worldwide, and all the other cancers together another
> $4 billion. I think we're up to $12 billion in drug sales and $300
> a share for DNDN stock.
> The reason this happens is that cancer is a sign of a weak immune
> system - even the American Cancer Society says that if one has a
> strong immune system, one will not get cancer. So instead of immune-destroying
> chemo and radiation, Dendreon's technology dramatically boosts the
> immune system. As in4thelonghaul said: "Provenge represents an extreme
> financial threat to the multi-billion dollar chemo dynasties of the
> giant pharmaceutical corporations which make such extreme profit
> from promoting cheap, higthly dangerous and relatively ineffective
> chemicals "
> Short it if you like. In NewWorldInvestor.com we've been long and
> right, and I just doubled my buy limit to $16 with a $40 target based
> on Provenge alone. Betting against the long-term success of Provenge
> probably will be very inexpensive, because it is very stupid.

Michael,

I like how you've made a financial model for Provenge to support the numbers. And, I love treatments that go against the modern day chemo regimins that basically carpet bomb the body.

But, I've been watching this space for a long time and taking on the establishment has some risks. I've invested in PPHM for years. They had a neat TNT (tumor necrosis therapy) drug that would "smart bomb" solid tumors with less chemo. PPHM has always been a small, capital starved player. But, TNT is a neat treatment. They didn't make progress. Oh, they made it to ph III, but never completed it and got set back. Lot's of reasons, but my belief is that they ran up against the chemo establishment. So, PPHM regrouped and has a new drug, Bavituximab, that like DNDN, helps marshal the bodies immune system to attack the tumor. Interesting thing though is that Bavi works well with chemo as chemo causes cancer cells to express more phosphidyliserene (PS), the bavi smart bomb target. So, like Avastin, PPHM entered trials with chemo as a combination. In essence, they are not attacking the establishment. Bavi can work alone, but chemo seems to help and that's not the point. The drug needs to get approved. I thought your point by your DNA friend was very telling.

Anyway, I like the idea of DNDN but probably don't buy all of the extrapolations to breast, lung, etc. as there are many other competitors out there (see Avastin and PPHM). But, I'm excited by the imminent timing. I'm looking for an entry. Do you think there will be a fall after next Monday where I can get in, or do I need to buy now and use some option insurance to protect my downside?

Thanks,

WH