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NG price (NYMEX front month) 2018

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Rockdale

  • 6138
Re: NG < $3.00
« Reply #30 on: August 02, 2012, 02:21:09 PM »
Looking through the commodities news section on Yahoo Finance I see that there was some bearish news in regards to natural gas due to an unexpectedly high figure for storage buildup.  It's a generally bad day for commodities even including the grains which should be going up with no break to speak of in the great drought of 2012.  You can go both crazy and broke in trying to predict day to day trends in commodity prices.  In terms of more meaningful long term trends in natural gas pricing there was an interesting bit of commentary on Seeking Alpha by a writer, Miachael Fitzsimmons.  His central point was that America's leading natural gas producer, Exxon-Mobil, has been remiss in not putting its considerable influence behind the use of natural gas as a transportation fuel.  He makes some interesting points both as to the gain for the national economy which could be realized if we fully utilized natural gas to power cars and trucks, as well as the opportunity to increase the price of Exxon shares which have stagnated these last 5 years if natural gas usage and the price for the commodity would rise.  And I believe Mr. Fitzsimmons makes a very good case that the Federal budget deficits and ever growing national debt are more a symptom of our foolishness in not using our own home grown fuels than the main economic problem.

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Chicken Farmer

  • 5536
  • L. A. N. Y.
Re: NG < $3.00
« Reply #31 on: August 02, 2012, 02:28:49 PM »
...... And I believe Mr. Fitzsimmons makes a very good case that the Federal budget deficits and ever growing national debt are more a symptom of our foolishness in not using our own home grown fuels than the main economic problem.

That's why we need a cohesive energy policy and strategy.  We need to establish an Energy Department to lead the nation on this important initiative.

... er. what did you say, oh, we got such a department already?... oh, yes, that Steven, er, who?

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Chicken Farmer

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Re: NG < $3.00
« Reply #32 on: August 02, 2012, 02:36:16 PM »
Who is they? How do they define break even? IRR? Drilling costs alone?

I understand they need $3.50 to break even.

...

Don't have that in my pocket this moment.  I have read reports from different sources comparing total costs for various plays in N. America, and they consistently show Marcellus gas to cost between 3.50 to 4.00, which is somewhat lower than most other plays.

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bellbucci

Re: NG < $3.00
« Reply #33 on: August 02, 2012, 02:43:52 PM »
Looking through the commodities news section on Yahoo Finance I see that there was some bearish news in regards to natural gas due to an unexpectedly high figure for storage buildup....
This is kind of strange. 28 Bcf injection at this time of year is still pretty low, and the numbers for the last five months point toward a 2012 high which is well under the 5 year average.

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Rockdale

  • 6138
Re: NG < $3.00
« Reply #34 on: August 02, 2012, 02:44:24 PM »
Who is they? How do they define break even? IRR? Drilling costs alone?

I understand they need $3.50 to break even.

...

Don't have that in my pocket this moment.  I have read reports from different sources comparing total costs for various plays in N. America, and they consistently show Marcellus gas to cost between 3.50 to 4.00, which is somewhat lower than most other plays.
>>>> CF, a little while back I posted an estimate by an expert in these matters who works for Societe Generale who claimed that the overall break even for Marcellus wells is around $1.90.  Others here pointed out that he might not be accounting for all costs with that estimate.  Since I'm not an experienced accountant with expertise in the oil and gas industry I'll have to defer to the opinion of others as to the final numbers.  But even as an amateur in these matters I would venture to say that every single natural gas production company has a different break even point, and that every single well also has a different point where profit turns into loss and visa versa.

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Isheoktoday

Re: NG < $3.00
« Reply #35 on: August 02, 2012, 03:08:09 PM »
Ruby_99, I agree. Not a big injection.  August, and September are rough months though.

Bentek in a report produced for North Dakota did an extensive analysis of IRR of the various plays. They estimate Marcellus Dry at a 3% return at $2.79 gas. AS Mohawk might write, read it. It is good and current. It goes into a lot about the pipelines nationally, and the Natural Gas markets. It was written for North Dakota. They mention that Marcellus to Chicago might have cheaper competition.

Both Ultra Resources, and Exco Petroleum mentioned in their conference calls that they have a high level of confidence that production will start falling off more by the end of the year. It is a normal lag from drilling slowdowns to production decreases.

Ultra Petroleum is "return driven" they will not drill wells to break even for cash flow.

" In order to determine the competitiveness of the major oil and gas producing plays in North America, BENTEK developed a financial model to calculate a representative internal rates of return (IRR) from typical wells in each play. The BENTEK IRR analysis includes data and information from company financials, including financial reports, investor presentations, news releases and transcripts from earnings calls. Producer-reported data is collected for multiple production characteristics and costs, including drilling and completion costs, operating expenses,
initial production rates, BTU content, decline curves, production taxes and royalty rates. The production data is then reviewed in order to determine a representative set of assumptions for each play. IRRs allow for an apples-to-apples comparison of well economics between dry gas, wet gas and oil plays and are used to analyze how sensitive returns are to changes in gas prices, oil prices, NGL prices, drilling costs and initial production rates. It is important to note that the analysis does not take into account full-cycle exploration and production costs, which typically include costs for acreage acquisition and exploration. BENTEK considers these expenses
to be sunk costs
."

http://ndpipelines.wordpress.com/natural-gas-study/ The link is on this webpage.

Sorry Chicken Farmer for the challenge. Just listening to a lot of company conference calls. Break even is likely going down even more from wherever it is.

Every recent quarterly is mentioning more reductions in drilling costs.

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shinobi

  • 4203
Re: NG < $3.00
« Reply #36 on: August 02, 2012, 03:38:55 PM »
I'm shocked out of my socks that Exxon-Mobil is not pushing NG as a transportation fuel!!

I mean, whoever would have guessed something like that!   Blue Laugh   Blue Laugh

[give me a break]

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Rockdale

  • 6138
Re: NG < $3.00
« Reply #37 on: August 02, 2012, 05:23:42 PM »
I'm shocked out of my socks that Exxon-Mobil is not pushing NG as a transportation fuel!!

I mean, whoever would have guessed something like that!   Blue Laugh   Blue Laugh

[give me a break]
>>>> We import about half of our oil consumption.  On the other hand the US has enough natural gas to be self sufficient in all respects including using natural gas for transportation and to export.  To keep up present levels of oil imports is inevitably going to require a series of wars in a world of increasing rivalry over scarce oil supplies.  Which is what the Iraq adventure was its heart, not the removal of Saddam Hussein's dictatorship or his imaginary weapons of mass destruction or ties to Al Qaeda.  Care to figure out what the tax rates will have to be if we've got a series of wars over oil going on as well as the human cost?

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Chicken Farmer

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  • L. A. N. Y.
Re: NG < $3.00
« Reply #38 on: August 02, 2012, 05:34:44 PM »
"They estimate Marcellus Dry at a 3% return at $2.79 gas"

A lot of good insights.  But 3% is probably a bit low for their cost of money or IRR.

Nonetheless, even if cost is $2.79, selling at 3 bucks is not worth their while.

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realman

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duffy

  • 2873
Re: NG < $3.00
« Reply #40 on: August 02, 2012, 07:05:57 PM »
Don't worry Walt, Rock will figure it out.

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Isheoktoday

Re: NG < $3.00
« Reply #41 on: August 02, 2012, 07:13:48 PM »
Realman,The article is a bit out of date. Some of the current reports are indicating that problems are arising as hedges are unwinding. The hedges they had back in March were higher than replacement cost of new hedges.

The Marcellus wet gas play comes out at 24% IRR given the assumptions in the report. With what appears to be an over supply in NGL's the price assumptions might be effected. Some companies leave the Ethane in the streaminstead of stripping it out, but that hurts the return.

The Bentek report assumes a 10% cost of capital.

One of the CEO's, maybe Exco maybe Ultra, expressed the opinion that a company  with acreage like Cabot can make money even at $2.50 gas. EQT might fall into that category also, but they have also been trying to get wetter production.

In William's conference call they mentioned that they currently have 2 pad capable rigs, and will be moving a 3'rd built for the purpose to Susquehanna in August. November.


The article in Platts. "Marcellus gas producers see opportunities despite current low prices" March 27, 2012
« Last Edit: August 03, 2012, 01:08:29 AM by Isheoktoday »


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Chicken Farmer

  • 5536
  • L. A. N. Y.
Re: NG < $3.00
« Reply #43 on: August 02, 2012, 10:07:11 PM »
Don't worry Walt, Rock will figure it out.

Naw, me not worried.

It's just academic for us New Yorkers.

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Chicken Farmer

  • 5536
  • L. A. N. Y.
Re: NG < $3.00
« Reply #44 on: August 03, 2012, 02:05:04 PM »
Today's movement correlates to the Dow and Oil market, so don't read too much into it.
....

Spoke too soon.

Market indices up 2% today.  Oil up 4 bucks, Henry Hub down.  Yikes!