Natural Gas: 50% greater reserves than once thought?

ROCKMAN

I'm in operations right now so I'm not watching the economics side too closely. But in general I know the increasing costs are starting to squeeze the profit on most of the NG resource plays. I'm sure the unexpected jump in NG prices this summer helped to keep the effort going. We hit our projected year end casing cost a month ago. Add the increased casin/drilling cost to more savy mineral owners ramping up acreage cost and then see a prolonged drop in NG prices: resource plays could cool off quickly. They'll always come back in time when demand picks up but it's just a question of who's still in the game. I know a lot of the public companies in the resource plays will continue drilling even if it got to swapping dollar for dollar: they'll not survive a prolonged decline in asset volume in the stock market these days IMHO.

I can't put a hard number on it but if NG stays around $7 - $9/mcf and cost keep ttp their up tick I think we'll be at that break even point in a year or two.

cube · Fusion Joined: Mar 12, 2005 Posts: 3967

ROCKMAN

Cube -- Unfortunately the folks he references are not on "Ignore" and they'll keep offering those drowning folks that lead life preserver. You probably remember I've been a petroleum geologist for 33 years and am fed up with folks throwing out both high and low numbers regarding reserves that no one has drilled yet. Next weekend I'm getting my concealed carry gun permit. In Texas this will allow me to shoot the next SOB that pretends he knows what can't be known. I'm all for drilling every location that makes sense economically and is environmentally safe. But I have completely lost my patience with the number throwers. I've sat though 100's of presentations by knowledgeable exploration geologist blowing smoke up my ass and telling me they "knew" the oil/gas was there. And now I have to listen to folks who can't spell "millidarcy" tell me how much oil/gas there is in spot they can't even point to on a map. It just too much to bear...I just gotta shoot someone just to relieve the stress.

Sorry....I missed lunch and my blood sugar is just too low.

cube · Fusion Joined: Mar 12, 2005 Posts: 3967

ROCKMAN

Oddly enough I was like you before I found this site and TOD. I guess it was one thing to see the press releases but to hear folks repeating it finally got to me. And I've battled both sides...the minimalists and the maximalists. I know how the big numbers are generated. I've done those models in the past. They are valid models but the layman doesn't understand what the model means. It just a projection of what COULD BE there...not what IS there. In the world of exploration geology there is a million miles between COULD BE and IS. In the English language the words seem similar. In reserve models it like the difference between octopus and helicopter. There is no meaningful connection.

And that's why I can't say the models by the USGS and others are wrong. They're probably reasonable. But those models don't indicate what IS there but only what COULD BE. And if the way I explained that is confusing...welcome to the crowd. I generally fail when I try to explain the technicalities.

bl00k

ROCKMAN

bl00k,

Good point. Perhaps they can get that guy who specializes in talking real fast in those TV ads disclaimers. I've read the originals of hundreds of such reports. They typically have pages of disclaimers attached including very detailed legal descriptions of the terms they utilize. Obviously, the MSM isn't going to burn up valuable commercial time explaining those minor details.

shortonoil · Fission Joined: Dec 02, 2004 Posts: 2785 Location: VA USA

ROCKMAN said:

ROCKMAN

You got that right short. Long ago I began paying very close attention to the choice of words used in presentations. The good hustlers knew the right words to use and were thus easy to catch on to. The really good hustlers knew what words I was on the look at for and would avoid them like poison.

I would always tease the exploration geologist about running risked reserve economics on wildcats. Exploratory wells always looked great in an economic analysis because you can put a big enough number in for the reserve potential that even with a low prob of success it still looked good. Being a career development geologist I was the last one the wildcatters wanted reviewing their deal.

DrillBites · Tar Sands Joined: Jul 31, 2008 Posts: 30 Location: Oregon

DrillBites · Tar Sands Joined: Jul 31, 2008 Posts: 30 Location: Oregon

yesplease · Fission Joined: Oct 03, 2006 Posts: 2927

ROCKMAN

You hit it on the nose Matt. The first thing any good exploration geologist will do is estimate the size of a reserve target compared to risk that would be needed to talk someone into drilling a well. Then you map it so the number works.

I'm not being catty Matt. This is how it's done. It's how it has always been done and how it will always be done. The only thing keeping us from drilling ourselves to death are the technology advances that can keep you from drilling a lot of thses dogs. Back in the late 70's drilling boom we had twice as many rigs running as we do now. That's because at least half those rigs were drilling prospect that wouldn't cut even under today's $100+ oil.