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  • Is The Tide Shifting With Natural Gas? [View article]
    @BermudaHigh--

    From your response, I'm not sure you actually read what I said. I also find your statements pretty conclusory and I am not sure you would find the evidence to back them up at anything like "across the board."

    Let's go back over what you said and what I said. I'll be brief this time. NOT.

    GIVE ME A BREAK. Although I frequently disagree with your conclusions, you don't strike me as someone who is a slow reader, so try to follow me, even though it is a few extra words: Really, I am trying to save you money.

    Also, I wouldn't need to be saying these if you had read my earlier stuff more closely. I really was trying to pass stuff on to you. I'm not trying to convince myself on this one: I have looked at this mofo so long and hard I am now downright bored with looking at it any more. It is pretty much a given as far as I am concerned.

    I have my money down and a chunk of my wife's too. If you had ever heard my wife bitch about money, you would know that I am damn confident in what I am doing or else I wouldn't have told her to let me invest a chunk of her money. Plus, she does trust me a bit because I have a pretty decent record when I do tell her to do something or to let me do something.

    Anyway, if I thought there was squat chance I was wrong, I would definitely have foregone the potential bitching from her that I would most definitely get if I lost any of her money. Hell, she bitches over trips to Home Depot and minor power tools. You think I would play with her money if I wasn't damn sure I wouldn't lose any and make her some? Not this boy: I hate bitching and I can't stand it when it is directed at me. (I'll provide the rest of my thoughts on marriage in a separate post.)

    "Production is in a plateau."

    I don't think production is in a plateau at all. Nor does the EIA. Nor does RBN.

    Even if it is, it is a plateau with almost 5 BCF/d higher levels than we had at this time last year. Hence, unless it is a truly record-breaking year, they have more than enough extra gas to handle amount of gas needed for additional summer power burn and still be able to inject at last year's levels as a minimum.

    Even if there are some declines from associated production (I won't go into a discussion about the natty coming mostly from the "sweet spots" that will keep getting drilled and not the marginal areas), those declines will be more, I say more, more, more, more than offset by the increases in production that will occur when the extra Marcellus production comes online, i.e., when the takeaway projects get finished.

    (And don't tell me how cold last summer was or how much the retirements have changed the picture: I have TOTALLY looked at all that stuff at the state by state and even plant by plant level. It was a drag. 2014 was big. 2015 will not be in terms of more retirements, etc. Basically it has already happened. We are now seeing in the numbers about as much power burn as there is going to be from retirements, conversions, new gas plants, and Appalachian coal switching. There isn't going to be much more at all until natty drops low enough to displace some PRB; my recollection is that is around the $2.00 level. In other words, this IS the big power burn you are now seeing right now and you won't see much more other than the July/Aug. peaks unless and until natty drops a lot further.)

    (Also, I am an environmental lawyer, so please don't tell me about MATS, haze, cross-state, NOx, etc. unless you know one whole hell of a lot about it--and by a lot I mean you are in hot demand to speak on it at continuing legal education seminars. Suffice it to say that I sure as heck wouldn't invest in coal, but notwithstanding that, I'm short natty now too and think the E&Ps are going do drop yet more.)

    (I'll be buying back in on natty E&Ps, but not quite yet, actually, probably not for many months yet. Normally what I primarily do is buy and sell natty heavy E&Ps based on what I think the market is going to do, knowing that will translate to their price. I've been doing that a long time and it has almost always worked well for me. I am patient, but this time not only did I sell the E&Ps (save one in Colombia), I decided I had play (i.e., short) natty too. The numbers are compelling.)

    "Financing at a reasonable cost has dried up."

    I have no doubt that FST is going to be hurting to get more money. I have no doubt that a lot of the Niobrara-levered companies are going to be hurting to get more money. EOG and COG won't have the slightest problem raising capital if they decide they need it.

    Look at SWN -- they really pulled the trigger hard at what seemed to be a less than ideal time. But, they did well on their financing and they got some killer assets.

    In my experience, the bigger companies play a long-term game. They don't pay very much attention to the current prices: They have groups/economists who have projected prices for 20 years into the future. Those are the numbers that they plug into their analysis of what the NPV of a given deal is. That isn't to say they won't take whatever reasonable steps they can to either capitalize on short term price swings up or minimize the damage on short term price swings down--they do. But, the leave the overreaction to others and plow ahead looking long term. So, they are blowing and going when prices jump back up while others are not.

    Anyway, my experience was with a really big company, but I got to observe both smaller and bigger. Plus, even though we think of a lot of the tight oil and shale gas companies as being "small," most of them are pretty good sized, i.e., billions and billions, not millions and millions.

    Think about it. SD is not dead yet. Of the companies I can think of that deserve to be dead, I would put SD really high on my list. I'll give them this: They generally did a pretty good job hedging. Bear in mind that they are not the only ones: Don't assume that these companies are getting spot current spot prices for their natty because most of them aren't. They had to commit to takeaway, they got someone else to commit to take it and probably at pretty decent prices. Yeah, I think a lot of them can get quite reasonable financing still; you would have to make a compelling showing to convince me otherwise.

    "There has been a staggering drop in the aggregate rig count." This again? Rig numbers don't matter. What kind of rigs, what kind of wells, productivity improvements, etc. Also, I think Force Majeure just did an article with some nice graphics showing how rig numbers wind up effecting production amounts. Check it out, but remember, his decline rates are too high and he didn't account for the fact that it is the "sweet spots" that will continue to get drilled. Sweet spot doesn't just mean "good." It means the areas where there is a really high GOR and very light API liquids, i.e, EOG, COG, MRO, in the Eagle Ford. See, e.g., this article: http://bit.ly/1jkSPLq

    "Associated gas production is expected to take a hit." See above. It won't be that big and it will be offset. Also, bear in mind that a lot of the associated gas production is just that, associated gas production. Some of it has been online for years and years and years, e.g., the Permian. And the production that keeps going in the, e.g., Eagle Ford, is going to be the "Sweet Spot" stuff that will inherently have a lot of gas.

    There is no way the associated production declines are going to outpace the production additions that will come online line this year due to Marcellus takeaway projects getting completed.

    It is a different world man. Don't play the old game while everyone else is playing the new one.




    Mar 25, 2015. 12:32 AM | Likes Like |Link to Comment
  • John DeSimone: Tragic Hero Or Fall Guy? [View article]
    Not all federal investigations work that way. Not by a long shot. There are Feds no one really cares about and there are Feds that people would choose having constant hemorrhoid pain rather than having those feds investigate their case. There are plenty of times when having certain Feds investigate is pretty much THE situation you don't want.

    I don't have any personal experience with the FTC, but there are Feds whose investigations are life and death matters for companies.
    Mar 24, 2015. 11:01 PM | Likes Like |Link to Comment
  • Is The Tide Shifting With Natural Gas? [View article]
    I'll try. Eschew Obfuscation used to be a bumper sticker of mine.

    1) I'm not sure. Here are a couple of things that might potentially be an explanation.

    There were some freeze-offs. Apparently they took longer than anticipated to get back online. I didn't follow the particulars on it, but I read a thing this morning that everything was now back online.

    I'm not sure how much faith I would place in the absolute shorter term numbers (i.e., after Dec. 2014). I expect they are close to accurate, but sometimes I do sometimes see revisions.

    Domestic dry production has seemed to be going in more fits and starts than normal, which I attribute to takeaway capacity in the Marcellus coming online. I think that is basically instant production, but it is pretty much going to come in bunches. I think there may be a couple of smaller projects coming online in spring and early summer, but I think the next big jumps for the Marcellus are more in the July and August range.

    Also, if you are looking at total supply, I was personally surprised at the level of Canadian imports and LNG send out. Perhaps that was stuff that was contracted for a while ago after last winter. I would not be surprised to see those numbers dropping now.

    2) I think the answer there lies in takeaway capacity too. The producers have to make binding firm commitments during open seasons in order to secure the capacity, which doesn't come online sometimes for several years. As the demand for more takeaway has grown, more projects have sprung up (i.e., they underestimated how much the Marcellus would grow and how quickly, so they have been behind the curve ball continuously in takeaway capacity). Producers have to make the commitments to get the takeaway. They have to do that way in advance, not just a couple of months. More projects = more supply = lower prices overall. Plus now we have the dry gas Utica which may wind up making the Marcellus look puny.

    Basically, as the takeaway comes online the Marcellus producers are going to displace a lot of the other production. The Marcellus producers with good acreage just want takeaway: They can incur significant transportation expenses and still out compete most folks on price. If I recall correctly, I think COG has 8 years of drilling left in its core areas. The Marcellus is a long way from being through, plus now the Utica has transport, and the dry gas Utica is sure looking like a monster, albeit one with expensive wells.

    I'm not so sure that the financing is going to dry up for the folks that can show they have the good netbacks. In many cases their profitability is somewhat impaired now because of oversupply, particularly due to lack of takeaway. But, both takeaway and demand will be growing, it is just a year or so away before much more hits. I think where you will see the production declines are in the legacy gas areas -- e.g., Oklahoma, LA, South Texas, CBM, offshore GOM, although the GOM is probably about bottomed by now. Further investment might not make much sense in a lot of those areas/types of plays.

    Hopefully that was sort of clear. If not, just let me know and I will try again. I type pretty fast and sometimes I get a bit ahead of good coherence.

    But, I do want to say I have always been a gas bull, for years and years and years, like 20 of them. This is just a temporary situation, albeit a longer than normal temporary situation. I'd actually like to see us planning to get the Canadian Montney, Duvernay, Horn River, Laird Basin, etc. gas coming our way to ensure a truly long-term supply and further develop export. But just now, man, the Marcellus was just too freaking good: The market didn't expect it and wasn't ready to handle it.
    Mar 24, 2015. 02:57 PM | 1 Like Like |Link to Comment
  • Is The Tide Shifting With Natural Gas? [View article]
    Oh, I have. Pretty close to as hard as I can. Fun already, but more fun to come.
    Mar 24, 2015. 01:45 PM | Likes Like |Link to Comment
  • UNG: A Young Natural Gas Bull Rages On [View article]
    Good point. As soon as you lose heating demand due to HDDs, you almost instantly start picking up power demand because of CDDs. A cold snap at the end of March or early April doesn't have nearly the effect as it does in January.

    Although CDDs tend to do more in terms of power demand, you also have power demand from HDDs. You get periods of lesser overall demand in the spring and fall when the average temps are closest to 65 degrees, i.e., fewer of the HDDs and fewer of the CDDs.
    Mar 24, 2015. 01:43 PM | 1 Like Like |Link to Comment
  • UNG: A Young Natural Gas Bull Rages On [View article]
    Or rather, more typically, wells that have been drilled and not completed and that are essentially awaiting the time when takeaway capacity will be coming online, at which time they get completed and readied to tie into the takeaway capacity as soon as it is available. There is a huge backlog of these wells in the Marcellus, and I would suspect the Utica too. Not too long ago it was over 1,000 and I suspect it still is. That is basically instant production waiting on takeaway.

    Oh, now we have the dry gas Utica too and it looks like it may even be more productive than the NE sweet spot in the Marcellus.
    Mar 24, 2015. 01:39 PM | 1 Like Like |Link to Comment
  • The Natural Gas Rebound Will Be Fueled By Low Oil Prices [View article]
    There are a variety of reasons that wells don't just get shut in for economic reasons. For one thing new production is probably being transported on new infrastructure, infrastructure it would not have access to without firm transport commitments. Natural gas doesn't transport well. It takes like 4X as much energy as oil to move through a pipeline. Pipelines try to avoid operating at levels that are below a certain minimum threshold; they are usually in a position where they can do so.
    Mar 24, 2015. 01:33 PM | 1 Like Like |Link to Comment
  • The Natural Gas Rebound Will Be Fueled By Low Oil Prices [View article]
    Hey wait, natty has a $2 handle and is falling. Did it split too?

    (a little joke based on an earlier comment)
    Mar 24, 2015. 01:24 PM | 1 Like Like |Link to Comment
  • Is The Tide Shifting With Natural Gas? [View article]
    Good job on LNG, but personally I would take the profits on that one before COB today.
    Mar 24, 2015. 01:15 PM | Likes Like |Link to Comment
  • Is The Tide Shifting With Natural Gas? [View article]
    The 4-part article Gigem77 cited to you used a Haynesville well for the purpose of providing an example. Hanynesville was used because it has a reputation as being one of the more expensive, less profitable plays.
    Mar 24, 2015. 01:13 PM | 1 Like Like |Link to Comment
  • Is The Tide Shifting With Natural Gas? [View article]
    3 BCF/d -- didn't we add that in much production in November 2014?
    Mar 24, 2015. 01:10 PM | 1 Like Like |Link to Comment
  • Is The Tide Shifting With Natural Gas? [View article]
    On the freeze-offs, this post from this morning:

    "Looks like everything is finally back online. Now we flat-line."

    That basically means flat-line until the first of the Marcellus takeaway projects hits in a few months.
    Mar 24, 2015. 01:09 PM | 1 Like Like |Link to Comment
  • Is The Tide Shifting With Natural Gas? [View article]
    @BermudaHigh --

    "When will the perma-bears acknowledge that gas has bottomed?"

    I'll be doing that right after I buy some coal stocks.

    Hint: Don't hold your breath for either. Or for the $4 handle you were looking for last fall.

    There is approximately 3.2 BCF/d of Marcellus takeaway coming on in 2015 in addition to total supply being up approximately 5 BCF/d from a year ago. We will start May with around 1,900 BCF in storage compared to 1,055 last year.

    There isn't going to be a whole lot more switching than has already occurred until PRB gets displace and that means below $2. Don't look for the MATS deadline to do squat in terms of immediate changes at that point--it has happened already or it will be happening later.

    More in storage, way more additional supply than new demand. But for the last two weeks of Feb. and the first week of March having a combined 222 HDDs more than normal, HH would be at $2 already. As it is, it is just a few weeks away.

    More in storage, way more additional supply than new demand: That means prices are going down.

    And by the way, new takeaway in the Marcellus = more supply. Those projects don't happen unless they have firm commitments.

    Going long now is just throwing money away. Pretty much every hub in the nation is sporting prices below HH prices. That should tell you where HH prices are going.
    Mar 24, 2015. 01:03 PM | 1 Like Like |Link to Comment
  • Is The Recovery Of UNG Underway? [View article]
    Oh, it can definitely go lower. Having too much natural gas is the next best thing to having too much electricity. It poses unique challenges. Just as soon as we get a couple of substantial injections in April, it will be below $2.00.
    Mar 24, 2015. 11:48 AM | Likes Like |Link to Comment
  • Bristol-Myers Is Playing Chess, Gilead And AbbVie Are Playing Checkers [View article]
    Good stuff . thanks
    Mar 24, 2015. 11:43 AM | Likes Like |Link to Comment
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