Bobwins

Are These Nine Methane Stocks On Fire, or Blowing Hot Air?

My experience has been that small cap explorers who specialize in coal bed methane have an extremely long rampup time. The coal bed methane produces very low amounts so you need to drill a lot of them. The wells typically pump fluids for a long time and you need to have a place to dump the fluids or pay for the tool that lets you reinject the water into another formation. Otherwise it's contaminated water that is expensive to get rid of.

You're not going to buy Consol or Peabody because they produce coalbed methane on the side. However they have the capital and cashflow from their main business to profitably extract the coal bed methane and wait for the production to add to profits. They already have the coal land so this is a nice additional revenue source.

I own QRCP because they are buying a private company with large Marcellus Shale land holdings. PetroEdge was the leader in the Marcellus and QRCP is buying their current production and acreage. The shale plays are the key to long term growth. The play extends over extended distances and has just been difficult to extract until recent technical advances have made it possible.

Now companies with capital can turn this into a factory situation. They have capital so they can afford the high costs of horizontal drilling and specialized fracing. They can throw additional capital at it and increase the number of drills and crews working their inventory. The results are more uniform and are high percentage.

If the industry can repeat the Barnett Shale, the plays with large acreage posiitions and good technical skills should become long term winners. The big guys can wait for a little guy like PetroEdge to prove up the area and then move in with cash when it's ready for a rampup in drilling.

There will be many winners in shale gas over the next few years. Ngas is clean burning, hard to transport and we already have a deficit in domestic production. We are getting about 15% of our consumption from Canada. That supply is dwindling as they use more themselves and use it for the tar sands rampup.

Bobwins