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Re: THE Natural Gas Thread (merged)

Unread postPosted: Fri 30 Dec 2016, 19:09:26
by coffeeguyzz
Rock
I've accessed the site Marcellusgas.org for a couple of years now and it has an incredible amount of data on all 15,000+ permitted unconventionals as well as the 7,000+ producers.

This last few months' production reports consistently showed numerous 4/5 well pads coming online with monthly output regularly running 500/900 MMcf per well and only slightly declining the ensuing months.
These wells are primarily located in prolific Susquehanna and Bradford counties (also a few Greene and Washington), but the increase in stage count, more closely spaced clusters, and huge proppant amounts has caused much of the bump.
The operators now have a few years familiarity under their belts and can optimally drill and place these laterals.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Fri 30 Dec 2016, 20:11:15
by Synapsid
coffeeguyzz,

Thanks for all the information you supply on the NG situation up there in the Basin. We don't get it anywhere else that I come across.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Fri 30 Dec 2016, 22:26:46
by ROCKMAN
Caffeine junkie - Dito. I usually just hit the general data from the EIA. But I suspected they were upping their game in the MS as they've been doing in the EFS.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sat 31 Dec 2016, 08:54:06
by GoghGoner
coffeeguyzz wrote:The spot price at the Algonquin citygate and, I believe, Tetco M6 NY could skyrocket if there is an extended cold snap. Next winter may be worse as there will be fewer coal burners available for backup.


It has already had one spike above $10, I think. We should see some fireworks in the coming month or two, if the rest of the winter turns out colder than average in that area. They were supposed to be importing more LNG by now, but we all know how much the energy companies know how to forecast trends.

New England natural gas pipeline capacity increases for the first time since 2010

The $972 million AIM project will bring additional natural gas from the Appalachian Basin into New England. The project is the largest pipeline project since 2007 to transport natural gas into New England from outside the region. The pipeline will provide an additional 342 million cubic feet per day (MMcf/d) of pipeline capacity to the New England market.

The $63 million Salem Lateral Project will provide capacity for the Salem Harbor Power Plant, a converted coal-to-gas electric power plant due to be in service in June 2017. Once completed, the 674 megawatt power plant will use up to 115 MMcf/d of natural gas to generate electricity for New England consumers.


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Re: THE Natural Gas Thread (merged)

Unread postPosted: Sat 31 Dec 2016, 09:22:01
by ROCKMAN
Goner - Yes, the spot LNG market can be brutal. They don't tend to advertise it but some LNG contract buyers will pull some of their supply and sell to a spot buyer. There's LNG contract prices out there at less then $8/MCF. Turn a few loads to needy utilities for $20+/MCF and pocket some nice change. And since most utilities price delivery on a cost+ basis paying out the ass for spot LNG doesn't bother them: they make $X per Btu regardless what the NG costs them.

BTW we always talk about oil futures but there are also a few LNG futures markets out there:

http://www.cmegroup.com/trading/energy/ ... -swap.html

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sat 31 Dec 2016, 09:40:22
by GoghGoner
That LNG price is interesting -- I knew the prices are gone up the last couple of months but I didn't know they spiked like that. Newcastle coal futures are still in backwardation and the current contract up 130% on the year. LNG probably has quite a bit more room to run. A natural gas shortage in the US isn't going to help relieve that pressure.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sat 31 Dec 2016, 10:37:47
by ROCKMAN
Goner - Have you followed the chat about the US potentially being on the verge of becoming a long term NET NG exporter? Some folks seem to feel that's a good sign for the country. It isn't: it doesn't represent an excess of domestic supply as increased competition from foreign buyers who are outbidding local buyers. Exports like the booming Mexican pipeline market and Asian LNG market. As I pointed out good news for us domestic NG producers. The consumers...not so much. For instance what happens to US KNG exports if/when the global LNG market juimps from $8/MCF to $15+/MCF? Companies are going to spend many tens of $BILLIONS on those new LNG terminals to not ship NG out of the country.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Wed 04 Jan 2017, 10:26:16
by GoghGoner
Yeah, Rock, when it takes years to implement changes (ie. LNG exporting/importing) and it is based on a crystal ball...

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Re: THE Natural Gas Thread (merged)

Unread postPosted: Wed 04 Jan 2017, 14:49:31
by ROCKMAN
Goner - "...when it takes years to implement changes...". Actually in the case of LNG exports: possibly decades. LNG sales contracts lock in for 20 years often with an addfitional 10 year option tacked on. IOW if US LNG sellers lock in a lot of foreign contract sales in the next few years all that NG will leave the US market place regardless of domestic demand. Even if domestic NG prices triple our consumers wouldn't even be able to outbid those foreign buyers because the contract price is usually benchmarked to Henry Hub prices.

IOW our consumers will be denied access to ever Btu of LNG exports contracted over the next few years for decades into the future. Same situation with long term contracts currently being signed with pipeline exports to Mexico's PEMEX. Consumer aren't complaining today. But wait until 2027 when folks up north can't heat their homes during an Arctic vortex or manufactures have to shut down for while. Which is what happened a couple of decades ago up north. And we don't have to look that far back. From just last summer:

"California regulators and utility executives are staring down a natural-gas shortage in the Los Angeles area that could trigger up to two weeks of electrical blackouts this summer. The state’s electric grid operator warned Friday that it may call for emergency reductions in electricity use on Monday and Tuesday, when a heat wave in Southern California is expected to push up demand for air conditioning. Without conservation, officials fear power plants could run out of fuel and trigger rolling blackouts."

Re: THE Natural Gas Thread (merged)

Unread postPosted: Thu 05 Jan 2017, 15:45:38
by AdamB
ROCKMAN wrote:Goner - "...when it takes years to implement changes...". Actually in the case of LNG exports: possibly decades. LNG sales contracts lock in for 20 years often with an addfitional 10 year option tacked on. IOW if US LNG sellers lock in a lot of foreign contract sales in the next few years all that NG will leave the US market place regardless of domestic demand. Even if domestic NG prices triple our consumers wouldn't even be able to outbid those foreign buyers because the contract price is usually benchmarked to Henry Hub prices.

IOW our consumers will be denied access to ever Btu of LNG exports contracted over the next few years for decades into the future. Same situation with long term contracts currently being signed with pipeline exports to Mexico's PEMEX. Consumer aren't complaining today. But wait until 2027 when folks up north can't heat their homes during an Arctic vortex or manufactures have to shut down for while. Which is what happened a couple of decades ago up north. And we don't have to look that far back. From just last summer:

"California regulators and utility executives are staring down a natural-gas shortage in the Los Angeles area that could trigger up to two weeks of electrical blackouts this summer. The state’s electric grid operator warned Friday that it may call for emergency reductions in electricity use on Monday and Tuesday, when a heat wave in Southern California is expected to push up demand for air conditioning. Without conservation, officials fear power plants could run out of fuel and trigger rolling blackouts."


Natural gas drillers will love this kind of hysteria, real or imagined, the same way drillers lapped up peak oil fears, and are salivating waiting for the next round.

The good news being that during the release of the full AEO2017 today, the EIA Administrator was quite bullish on natural gas supplies in general, and was asked exactly a question about current inventory levels in the NE, apparently there was a large draw recently, and the questioner from some bank/analytic firm was interested in the topic.

Of more interest to me was Adam's mention of the natural gas/oil price dependency, hadn't ever though about that relationship before, but it is quite critical to the functioning of how their projections work.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sun 08 Jan 2017, 08:48:32
by GoghGoner
Marcellus prices showing a spike. They are now earning about 300% compared to what they were getting at some points last winter. Anadarko has sold out its remaining Marcellus assets to a private energy firm this past month.

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Next up for Anadarko, is to sell-out of Eagle Ford. They are taking advantage of the downturn to upgrade into some profitable stuff after finding out that shale gas stuff is uneconomic.

Anadarko “has been among the most aggressive in selling noncore assets, which will likely continue in 2017 as well, with its Eagle Ford assets in the queue,” Mr. Tameron said.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sun 08 Jan 2017, 11:21:24
by ROCKMAN
Goner - "Next up for Anadarko, is to sell-out of Eagle Ford." Just one more small bit of perhaps the largest US fossil fuel wealth transfer in history. Folks have highlighting the less then impressive economic results when oil/NG prices were high let alone now that they've dropped. The world of production acquisition/divestiture (the Rockman's specialty) can be the polar opposite of exploration/drilling where the upside is hyped. In the a/d world the downside is hyped by the aquisition side which, in a buyers market, has the leverage over the sellers. Buying PROVED PRODUCING oil reserves today for $12 to $18 per bbl and PROVED PRODUCING NG reserves for $1 to $1.40 per MCF carries much less risk the drilling for unproven reserves.

Companies are buying positive cash flow reserves for less then it has cost them for a decade to generate the same by drilling. You won't see it in the MSM but these are truly boom times in the oil patch...for some companies. ExxonMobil will make a profit on oil reserves it buys today even if prices slip to $35/bbl. And if it increases to $65/bbl in a few years? A much better profit margin then it has seen in a long time.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sun 08 Jan 2017, 14:19:22
by coffeeguyzz
Rock
That is exactly what happened in this case.
Alta, the company George Mitchell backed when it got started, sold a bunch of high priced leases in PA just as the frenzy started. (Alta got in early/cheaper due to foresight and extensive research).
Anadarko bought large and planned on using Japanese JV money for operational expenses.
Now, for a relatively modest sum, Alta owns near 200,000 acres in prime (Lycoming county) real estate along with a few hundred producing wells putting out near half billion cubic feet a day.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sun 08 Jan 2017, 14:55:01
by ROCKMAN
Expressoman - Same thing with BHP Billiton: paid $12.1 billion for Petrohawk's position in the Eagle Ford and saw its stock steady decline from the day the deal closed. Started taking a major hit BEFORE oil prices dropped. And that $12 billion ain't nothing compared to its almost $100 billion in decreased stock value at one point after the Petrtohawk acquisition. And the Petrohawk guys (now called Halcon...a type of Mexican hawk) may tried to run the same game in the hopefull eastern extention of the EFS but the timing didn't work out:

"The move to restart drilling comes after Halcón emerged from bankruptcy in September. When the company filed, it listed total debts of nearly $3.15 billion and total assets of almost $2.85 billion. The restructuring eliminated approximately $1.8 billion of the company’s debt plus more than $200 million in future annual interest expense."

Halton also sunk a lot of $'s in the so far unimpressive Tuscaloosa Marine Shale before the bottom dropped out.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sun 08 Jan 2017, 15:49:12
by coffeeguyzz
RM
A somewhat similar story, with some interesting twists, involved Shell losing their ass in the"Shale World" a few years back.
Guy named Terry Pegula - longtime, small operator in Pennsylvania - made a couple of multibillion dollar sales of Marcellus leases he had worked for decades. Almost $5 billion to Shell.
Bought some professional sports teams including Buffalo Bills.
Shell acted like a bull in a China shop and lost a ton ... selling out much of their acquisitions.

But, here is where it gets interesting.
Shell kept a few hundred thousand acres in Tioga county and quietly persevered with a small, entrepreneureally minded team targeting the Utica.
They are successfully developing this area and have leased a lot more acreage.
Pegula? He got back in the game by forming JKLM as a private company, leased a chunk of land next county over - Potter - and drilled a Utica well, the Sweden Valley, that has produced 3 Bcf in less than 10 months online.
This successful areal expansion of the Utica is one of the more unheralded stories in this Shale World today, IMHO.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Sun 08 Jan 2017, 23:22:27
by ROCKMAN
coffeeguy - Yep...Shell wins and loses big. They paid $1 billion for a single EFS lease in far south Texas. Drilled more than 160 wells very fast. Last time I looked initial production for the average well they had completed was less than 85 bopd. I estimated the sunk $2.5 billion and the ran like a scalded dog.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Mon 09 Jan 2017, 19:46:43
by AdamB
coffeeguyzz wrote:This successful areal expansion of the Utica is one of the more unheralded stories in this Shale World today, IMHO.


Shell was discussing their success in the Utica in NE Pennsylvania at the national AAPG conference, in 2015 I believe. They made the statement during their presentation session that the main gas play in the Appalachian basin will, ultimately, not be the Marcellus.

This seemed to be backed up the local experts right about the time Shell was discussing this.

http://wvutoday.wvu.edu/n/2015/07/14/ut ... -wvu-study

Re: THE Natural Gas Thread (merged)

Unread postPosted: Mon 09 Jan 2017, 19:58:50
by pstarr
AdamB wrote:
coffeeguyzz wrote:This successful areal expansion of the Utica is one of the more unheralded stories in this Shale World today, IMHO.


Shell was discussing their success in the Utica in NE Pennsylvania at the national AAPG conference, in 2015 I believe. They made the statement during their presentation session that the main gas play in the Appalachian basin will, ultimately, not be the Marcellus.

This seemed to be backed up the local experts right about the time Shell was discussing this.

http://wvutoday.wvu.edu/n/2015/07/14/ut ... -wvu-study

Did this post subsequently read . . . "A billion here, a billion there, pretty soon, you're talking real money. - Everett Dirksen" . . .

at precisely Mon Jan 09, 2017 4:46 pm?

Re: THE Natural Gas Thread (merged)

Unread postPosted: Mon 09 Jan 2017, 23:26:32
by coffeeguyzz
The past several months have seen numerous Marcellus wells come online flowing 15/20/25 MMcfd for a few months, but nothing can compare with the few successful Deep Utica wells in SWPA.
The casing pressure on some have approached or exceeded 10,000 psi.
Only a few, the Scotts Run being most noteworthy, have maintained long-term (10 month +/-) high flow rate, but the production is extremely high.
The SR flowed 29 MMcfd for 9 months, has cumulative over 11 Bcf in 15 months online, all with a lateral 3,200' long.

This calendar year, both the Deep Utica potential and the Upper Devonian formations will have several wells drilled and should provide more clarity on future prospects.

Re: THE Natural Gas Thread (merged)

Unread postPosted: Wed 11 Jan 2017, 09:59:51
by AdamB
coffeeguyzz wrote:The past several months have seen numerous Marcellus wells come online flowing 15/20/25 MMcfd for a few months, but nothing can compare with the few successful Deep Utica wells in SWPA.
The casing pressure on some have approached or exceeded 10,000 psi.


I know. The BOP pressure ratings look like something you would see in the Gulf, seeing pieces of them being trucked to location is an amazing thing.

But as with all continuous or resource type plays, not all wells are created equal, and what the E&Ps find in SWPA they might not find anywhere else. Then again, an even higher overpressured area might just be 3 counties over.

One of the reasons that the WVU Utica study is just another piece in the puzzle.

coffeeguyzz wrote:Only a few, the Scotts Run being most noteworthy, have maintained long-term (10 month +/-) high flow rate, but the production is extremely high.
The SR flowed 29 MMcfd for 9 months, has cumulative over 11 Bcf in 15 months online, all with a lateral 3,200' long.

This calendar year, both the Deep Utica potential and the Upper Devonian formations will have several wells drilled and should provide more clarity on future prospects.


The economics of the oil and gas fields of America don't run on singular wells, they run on the average, or more specifically the distribution, and which part of it your leasehold allows you access to. The USGS has been quantifying this type of uncertainty for decades now, for example here are their distributions for the continuous plays they have assessed in the US.

https://pubs.usgs.gov/of/2012/1118/OF12-1118.pdf