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THE Natural Gas Thread (merged)

General discussions of the systemic, societal and civilisational effects of depletion.

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Re: THE Natural Gas Thread (merged)

Unread postby ROCKMAN » Wed 18 Jan 2017, 14:26:05

Goner - "Maybe you should offer consulting services to the EIA and help out all of those economists." That would work for me...I've worked on a consulting basis much of my career. All the EIA need do is tell me the answer they are looking for and I can build a defendable construct to come as close as possible to what they desire.

That is what we consultants do, ya know. LOL.
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Re: THE Natural Gas Thread (merged)

Unread postby ROCKMAN » Wed 18 Jan 2017, 14:58:29

Espresso man - Yep. Can jump to the extreme: and offshore platform. Had one spent almost 3 years drilling 18 wells, then waited 8 months for a tender and completion rig. Then 1 1/2 year completing the 18 wells. And then almost 2 years putting production equipment on. Fortunately were confident enough on output to spend 14 months laying pipelines while putting in the facilities.

So production didn't start until about 5 years after the drilling rig was released. But what a surge: over 200 million cubic feet per day and 5,000 bopd came on in less than a montyh. Well worth the wait. LOL.

But I also saw a cohort's little 700 MCF/d well wait 14 months before producing. Pipeline was close but he got sloppy: didn't check on available capacity in the line: there was none so had to wait for other wells to decline.

And the sad/funny part: for a month when he didn't know about problem he maxed out his credit card partying. And then one night after the sh*t hit the fan he came home drunk. His wife got the credit card statement that morning. When he woke up on then entry way floor the next morning he guessed she was waiting behind the door and cold cocked him. A volatile couple from rural Mississippi.

True story. The take-away: don't party until the first run check clears the bank. LOL.
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Re: THE Natural Gas Thread (merged)

Unread postby kublikhan » Mon 23 Jan 2017, 20:40:40

Looks like US natural gas prices are starting to edge upwards. Projections for 2017 & 2018 are for around the $3.50 - $4 range. Still low by international standards but a step up from the $2 range we had in recent years.

Natural gas prices averaged a little more than $2.50 per mmBtu (million British Thermal Units) in 2016. Those days are over. Prices will average at least $3.50 to $4.00 in 2017.

Prices have more than doubled since March 2016 but gas is still under-valued. Supply is tight because demand and exports have grown and shale gas production has declined. In April of last year, I wrote that natural gas prices should double and they did. Henry Hub spot prices increased 2 1/2 times from $1.49 to $3.70 per mmBtu and NYMEX futures prices doubled from $1.64 to $3.30.

Nevertheless, gas prices are still too low. Storage was at record high levels throughout 2016 reaching 4.1 Bcf (billion cubic feet) and 84% of working capacity in mid-December. Storage has fallen 1.1 Bcf in the last month to 61% of capacity. That is below the 5-year average.
Why Cheap Natural Gas Is History

Henry Hub Spot Prices (dollars per thousand cubic feet)
2015 2016 2017 2018
2.72 2.60 3.67 3.85
EIA SHORT-TERM ENERGY OUTLOOK
The oil barrel is half-full.
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Re: THE Natural Gas Thread (merged)

Unread postby ROCKMAN » Mon 23 Jan 2017, 21:47:57

k - Yep, NG prices have been relatively stable for a while. Just as they were between 2002 and 2006. And then in the next 3 years yo-yo between $3 and $12 per MCF. As always oil/NG prices tend to be rather predictable. Until, of course, they aren't the least f*cking predictable. LOL.
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Re: THE Natural Gas Thread (merged)

Unread postby sparky » Tue 24 Jan 2017, 16:39:26

.
On "Zipper fracks" in Australia , the open cut mining industry does something equivalent .
when blasting a coalface , the location and timing of the blast holes are calculated to maximize and direct the stress
it make a big improvement in output .
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Re: THE Natural Gas Thread (merged)

Unread postby AdamB » Tue 24 Jan 2017, 20:26:47



That is just Art Berman doing the usual. Most famous for doing the boy who cried wolf routine for both LTO and shale gas, right in the middle of them creating either A) the fastest growing oil production in the countries history or B) creating yet another peak in natural gas in the US and currently accounting for 68% of national production. Art just seems to be happy claiming the end of things, always.
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Re: THE Natural Gas Thread (merged)

Unread postby GoghGoner » Wed 25 Jan 2017, 07:48:48

Here is a quote from the article. I haven't done any analysis on comparative inventories so I can't say much about that but I agree with the below - excepting break even prices (I have issues with such numbers). Coal inventories are dropping faster than expected right now and are now below the five-year average. Lucky for the US, we have had an extremely warm period this January and the forecasts aren't too cold. If it would have been 2014, I can't imagine the spike we would have gotten in prices.

Only the Marcellus and core Utica break even at $4 gas prices. The Marcellus has stopped growing and more pipeline capacity to better-priced markets won't happen as quickly as some analysts believe. Although the Utica play has growth potential, it will be spread over several years and will be largely cancelled by increased exports.

Shale gas magical thinking remains strong but the paradigm of infinite, cheap supply is no longer working. There is now too much demand between power consumption and exports to keep up with declining production.

Once decline begins, it is almost impossible to turn around short of a massive drilling campaign. The requisite capital and public support are simply not there.

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Re: THE Natural Gas Thread (merged)

Unread postby ROCKMAN » Wed 25 Jan 2017, 08:20:26

Goner - First, I have no idea how they define a "break even price". In 40 years I've never seen that term used once in the oil patch. Second, production in the Marcellus Shale boomed during the period when the inflation adjusted NG prices averaged about $4/mcf.:

http://inflationdata.com/articles/infla ... as-prices/

Drilling has dropped off and production has seemed to plateaued. But it's too early to predict the future trend IMHO especially since prices have been on the increase recently.
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Re: THE Natural Gas Thread (merged)

Unread postby rockdoc123 » Wed 25 Jan 2017, 10:28:21

Goner - First, I have no idea how they define a "break even price". In 40 years I've never seen that term used once in the oil patch.


its actually used quite a bit, especially when it comes to analysis of the shales and other projects that tend to be "expensive". Basically it refers to the total cost to find and develop a unit (usually expressed in barrels or MCF) of petroleum. Over the years Finding and Development costs have been a close equivalent calculation. Usually the calculation assumes a discount rate (most often 10%) and the calculation is run such that NPV=0 or the point at which you have made back all of your investment. IT is an important number in terms of understanding at what point certain plays are profitable or not. As an example the Horn River shales have a break even price of around $5 /MCF whereas Marcellus is closer to about $1.35 /MCF. Hence a new green or brown field project in Horn River won't make much sense but one would in the Marcellus.
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Re: THE Natural Gas Thread (merged)

Unread postby coffeeguyzz » Wed 25 Jan 2017, 14:10:44

2017 and 2018 are apt to see significant increase in takeaway capacity from the Appalachian Basin, thus giving operators slightly higher prices.
Very few new pads need to be built, and, costing $1 to 2 million a pop, significant savings will occur going forward.
The AB will continue to be a low cost, highly prolific area for decades to come.
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Re: THE Natural Gas Thread (merged)

Unread postby ROCKMAN » Wed 25 Jan 2017, 20:59:33

Doc - Sorry but your definition doesn't work. For instance: "...the point at which you have made back all of your investment." In my world that has always been called the "payout" which is measured in months and not $'s. As far as " Hence a new green or brown field project in Horn River won't make much sense but one would in the Marcellus." Name on trend you ever worked that ever prospect worked at the same $ per bbl or MCF. IOW you seem to be saying that every Marcellus well has the same payout time at $1.35/MCF or produces the same ROR at $1.35/MCF.

So again you need to explain what that $1.35/MCF in the Marcellus Shale means. If the play is attractive at that "break even price" and NG prices are significantly above that level why has activity fallen off? It seems as though the BEP is being presented as an important predictive metric: how so?

Again let's be clear we're not talking past each other. Obviously I'm familiar with the various economic metrics you described. But to be clear: in 40 years I've not heard the specific term "break even price" in a single discussion of a prospect's economic analysis.
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Re: THE Natural Gas Thread (merged)

Unread postby rockdoc123 » Wed 25 Jan 2017, 22:02:17

Doc - Sorry but your definition doesn't work.


its the definition used by pretty much every investment banker I've ever spoken with in the past few decades. This information is published quite a bit so I'm not making it up. Bloomberg has a graph as do many of the investment banks out there

https://therationalpessimist.files.wordpress.com/2015/02/breakeven-points-for-us-shale-plays-jpeg.jpg?w=500

Name on trend you ever worked that ever prospect worked at the same $ per bbl or MCF. IOW you seem to be saying that every Marcellus well has the same payout time at $1.35/MCF or produces the same ROR at $1.35/MCF.


your missing the forest for the trees. When analysts speak of break even costs they refer to the sum total of all Marcellus or sometimes Marcellus in the liquids window or sometimes Marcellus in the dry gas window. Of course it lumps together various wells but the analysis is meant to be statistical which is the only way you can approach things at the high level. I'm not talking about an analysis done to invest in one well where someone would want to know what the break even cost is but rather if I have a choice of investing in Horn River or Marcellus at current pricing which would make the most sense from a potential profit perspective.

So again you need to explain what that $1.35/MCF in the Marcellus Shale means. If the play is attractive at that "break even price" and NG prices are significantly above that level why has activity fallen off? It seems as though the BEP is being presented as an important predictive metric: how so?


The break even cost is the point at which you make zero profit on a full project NPV10 basis. I personally would want at least a Discounted profit to investment ratio of 0.3 or a IRR of 35% on a risked basis. That requires somewhat higher price. Also companies are not going to leap into something because it just broke past the price line for profit, they will wait until they feel comfortable prices have stabilized and are going to stay static or go up and not down. As to gas activity some slow down is always expected when you have shoulder season facing you...why bring a well on stream when price is at it's annual low especially when you have such high initial decline rates.

But to be clear: in 40 years I've not heard the specific term "break even price" in a single discussion of a prospect's economic analysis.


I suspect that is based on the scale that you are looking. I believe you have been focussed on individual opportunities whereas much of what I was looking at over the years was comparing opportunities across a number of basins and play types in a given country or comparing opportunities across a number of countries in a given region. We used break even analysis as a comparative measure all the time. If I was running economics on a given well that metric was only looked at indirectly as we often calculated out NPV=0 so we could understand what the downside risk was.
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Re: THE Natural Gas Thread (merged)

Unread postby coffeeguyzz » Thu 26 Jan 2017, 00:04:03

...Gentlemen,

To put an actual example of a ridiculously low sounding figure of $1.35Mcf, the 5 well pad, Eakin, Sandra from Range - online over a 4 to 6 month time frame - has total production over 12 Bcf.
At $3/mmbtu, that's over 36 million bucks gross revenue in a few months time.
Even at $7 million per well (actual drill/completion claimed under $6 million per), this pad is in its way to profitability as daily output still runs 10/15 MMcfd.

2016 has seen numerous pads producing at this level.
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Re: THE Natural Gas Thread (merged)

Unread postby Subjectivist » Thu 26 Jan 2017, 13:21:47

Hey Rockman, any chance that shallow gas layer extends up here to Toledo? Could I drill my back yard and stop paying so much for winter heat to Columbia Gas?
II Chronicles 7:14 if my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land.
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Re: THE Natural Gas Thread (merged)

Unread postby ROCKMAN » Thu 26 Jan 2017, 17:04:30

Sub - Some local stories about shallow NG in Ohio:

http://www.practicalmachinist.com/vb/ge ... ll-205219/

BTW the reason why a lot of shallow NG is developed is the pressure. Most sales line run at 400 psi to more commonly 600 psi. So low pressure NG has run thru a compressure usually run of the gas from the well...not cheap equipment. If there's a lot in an area someone might nut up and build a "low pressure gathering system". OTOH to run thru a household system you need to depressurize significantly.

Shallow NG Toledo Ohio:

https://books.google.com/books?id=Bms-A ... io&f=false

As I've explained numerous times NG in shallow fresh water aquifers is not an uncommon phenomenon in many of the shale play trends.
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Re: THE Natural Gas Thread (merged)

Unread postby yportne » Thu 26 Jan 2017, 22:45:06

For clues to coming natural gas withdrawals. http://www.natgasweather.com
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Re: THE Natural Gas Thread (merged)

Unread postby GoghGoner » Fri 27 Jan 2017, 10:15:27

As a data geek, I really liked the addition of a confidence interval on the weekly storage numbers. Looks like they have NG stocks dialed in, I would love to see this for the weekly oil stocks.

Image

The standard error can be used to construct a confidence interval centered about the estimate. For example, the published weekly estimate of the net withdrawal for January 20, 2017, is 119 Bcf, and the standard error of the net withdrawal is 2.9 Bcf. The 95% confidence interval ranges from 113 Bcf to 125 Bcf.
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Re: Gas demand set for first fall in 50 years

Unread postby GoghGoner » Wed 22 Feb 2017, 10:34:43

VMT going up and mpg going down.

Sales of sedans and other cars fell to the lowest level in six years last month, while light trucks set a January record.



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Re: THE Natural Gas Thread (merged)

Unread postby kublikhan » Wed 22 Feb 2017, 10:50:43

ROCKMAN wrote:k - Yep, NG prices have been relatively stable for a while. Just as they were between 2002 and 2006. And then in the next 3 years yo-yo between $3 and $12 per MCF. As always oil/NG prices tend to be rather predictable. Until, of course, they aren't the least f*cking predictable. LOL.
Indeed. Natural gas dropped back into the $2 band. I guess that's still mild compared to the $3 to $12 jumps though:

Natural gas prices plunged to their lowest level since November on mild weather in the U.S., which has caused storage levels to decline at a much slower pace than expected. Front-month natural gas prices fell to $2.63/MMBtu in the third week of February, down from nearly $4/MMBtu at the end of last year.

The winter of 2017 is turning out to be the second warmest on record, second only to last year’s winter. “It’s been kind of worst-case scenario for the bulls. The utter lack of (heating) demand is, in my opinion, 99.9 percent of the natural-gas story.” To make matters worse, production has also turned around after prices shot back up.

Another unique factor to watch is the torrential rain in California. Higher water levels in the state’s reservoirs, and from larger snowpack, will help hydroelectric dams produce more electricity this summer. The result will be softer demand for natural gas in the state, another bout of bad news for gas bulls.

Natural gas is one of the most volatile commodities, so prices will continue to swing up and down. Indeed, volatility might pick up in the coming weeks on the changeover in seasons, as well as the large volume of open interest options remaining in the market. The swings in prices have attracted a lot of bets on gas prices. “Nothing gets a volatile market like natural gas going more than an overabundance of long or short positions.” It is like a game of musical chairs.
Natural Gas Bulls Crushed As Prices Tank
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Re: Gas demand set for first fall in 50 years

Unread postby AdamB » Wed 22 Feb 2017, 16:20:53

GoghGoner wrote:VMT going up and mpg going down.

Sales of sedans and other cars fell to the lowest level in six years last month, while light trucks set a January record.



Image


And the Lord said...."Drive your SUVs in time of summer and prosperity...and in so doing increase the price of that magix elixir that fuels them...but beware! For your demand for the elixir will change the price, and then you shall see the winter of despair, peak oil fear memes and a need for EVs and sub-compacts once again! And so shall it be, one cycle after another, low oil prices curing low prices, and high oil prices curing high oil prices, and I see that it is good! (for those making a living off the sales of one car type or another as people trade them in anyway)"
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