http://www.reuters.com/article/2011/...+/+US+/+Energy) CHK CEO take on NYT article.Originally Posted by latech80
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http://www.reuters.com/article/2011/...+/+US+/+Energy) CHK CEO take on NYT article.
Yep, many in NG industry are shooting back across the bow at that NY Times article. Imagine, NY Times has an agenda. The main point of their article was to say that at current price levels, NG reserves are overstated, so the industry is lying about everything. As we all know, prices in commodities rarely stay the same. If NG goes up a dollar or two, all of the sudden these reserves are viable.
I read a drilling prognosis a couple of years ago that said the cost to drill in the Barnett is $1.50/mcf. I don't know about the Haynesville, Marcellus, or Eagleford. But at that cost, it's still very profitable. Everything is moving to south Texas though, and getting away from the dry gas.
Not sure on that number. I know that in the Haynesville, with a well cost of 9.5 MM and a rate of return of 10%, gas prices need to be $4.65 (assumed 6.5 BCF of production). This is the base expected case per Wood Mackenzie. Obviously, this is wanting a 10% return.
If you get into drilling and gas prices fall, but you have creditors to pay and you can cover your variable drilling costs, you keep drilling. I dont know how low that number is.
However, that $4.67 number is a key number for future drilling at Haynesville. Gas prices need to get consistently above that for more drilling. As splicer stated, rigs keep moving to Eagle Ford because the economics there work out even if Natural Gas is 0 dollars from what I have heard.
I believe the wording was "finding costs", but I know the figure was $1.50. I don't know if that counted production or not. I know it doesn't count transporation.
Something I found interesting, is that my family leased our mineral rights 3 years ago in the Cotton Valley area, for a fair but sizable amount (3 years with a 2 year option at 75%). They even staked a spot they wanted to drill. What's even more odd, is that only a quarter mile away is a shut in well and three platforms.
The lease ran out last month without even a phone call of a non-renewal. I guess North La is not quite as hot as they thought (or at least in my area).
Let me pose this question, and mind you, it comes from a standpoint of ignorance, at least as it pertains to the oil and gas industry.
I know that someone is using surrogates to lease land in the stateline area, and it is rumored that they have spent over half-a-billion dollars to date in parts that haven't seen activity since the 1970's, at the earliest. If there's nothing there, then prudence would dictate that you shouldn't spend those kind of dollars on nothing.
The operative question (at least from my standpoint) is why would you do such a thing when the m. o. these days is to hold on to your cash?
Wild rumors are always amazing. 500 million?One tenth of that is on the high side and probably one half or less of that. Still a lot of money, but a drop in the bucket for companies with big leasing budgets. Any money spent so far is in no way indicative of any conviction concerning the viability of the play.
I stand corrected on the rumor about the $500MM on leases. I apologize for any misunderstanding on my part.
Since you are an industry insider, would you care to tell us what the viability of the Brown Dense/Smackover is?
Wild rumors are always amazing. 500 million?
Exactly, and these leasing budgets are options. It is worth it for these guys to spend a little money to potentially find a gold mine. Not to mention, these guys know what they are doing. They arent just blindly drilling holes in the earth, they have some sense of rather or not something is there. They arent always right, but they are usually successful.
A half billion would get you 25,000 acres leased in the Eagle Ford (hottest play in US right now), which is very proven and has liquids. Just to give some clarity on what half a bil would get you. An unproven area with some prospects, I have no idea what that goes for.
Hey, no apology needed. I didn't mean to sound like I was scolding. I was just emphasizing the danger of rumors. IMHO, the BD will prove productive at specific locales for specific reasons, but will not prove to be regional in scope.
LFR, what did you think of the NY Times rag piece?
The NYT article was clearly no attempt at serious journalism (they've apparently lost the formula). I've never understood the economics of shale plays, but one can't deny that Haynesville shale production is a bit higher now than it was in 2008 despite having only half as many rigs running now. It seems that the production decline curve for these wells is flattening as predicted so that any incremental drilling, even with fewer rigs, results in an overall increase in production since there is only a small decline rate from existing wells to overcome.
I still don't like shale economics in the shorter run, but longer term they may be great wealth generators.
The "Enron moment" comment was too much for me, just pure fear mongering BS. Then, to have some lady at the Fed who was a damn stock broker giving her analysis on well data? How about you get someone that has a clue to look at the well data?
I also thought it was funny how blinded NYT is by their agenda that they miss out on all of the good this glut of gas has done for the consumer. Low NG prices, lower electricity prices and jobs during a tough economic time. But, nooooooo, the NYT is so worried about shale gas being drilled in their own backyard that they have to blast it. Then, to only look at rig data from the Barnett and quote people from 2 years ago on a technology that his improved greatly during that time. It was just a patchwork rag piece.
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