oil vs gas
oil vs gas
we have eog and now chk shifting their interest from nat gas to oil. if this trend accelerates isn't it possible we could be seeing natty shortages in the next few years due to lack of interest driven by larger margins in oil?
Re: oil vs gas
Yes, the superior economics on oil drilling projects is drawing more capital and more rigs away from the gas drilling. This was a topic of discussion at the UBS presentation I went to last week. Basically, "The best news for natural gas prices is the high oil price." UBS is now forecasting $7/mcf of gas in 2012.
When questioned about their gas forecast the presentor was not as bullish as the "official" UBS forecast. It assumes an economic turnaround in the U.S. resulting in more industrial demand and increasing use of natural gas for power generation.
Near-term outlook for gas is very bearish. There are now ~3,000 gas wells waiting on completion. The operators are in no hurry to produce more gas at these prices. Also, read my profile on PetroHawk. The companies in the Haynesville Shale are now choking back wells to increase EURs.
If you do want more gas in your profile take a look at NFX, EOG and XEC. All have a lot of gas but their liquids production is going up. NFX has over 65% of 2011 gas hedged at over $6/mcf. If gas prices do rebound, these three Sweet 16 members will do very well.
Dan
When questioned about their gas forecast the presentor was not as bullish as the "official" UBS forecast. It assumes an economic turnaround in the U.S. resulting in more industrial demand and increasing use of natural gas for power generation.
Near-term outlook for gas is very bearish. There are now ~3,000 gas wells waiting on completion. The operators are in no hurry to produce more gas at these prices. Also, read my profile on PetroHawk. The companies in the Haynesville Shale are now choking back wells to increase EURs.
If you do want more gas in your profile take a look at NFX, EOG and XEC. All have a lot of gas but their liquids production is going up. NFX has over 65% of 2011 gas hedged at over $6/mcf. If gas prices do rebound, these three Sweet 16 members will do very well.
Dan
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: oil vs gas
A "gasser" on our Watch List that I really like is former Sweet 16 member Range Resources (RRC).
Read this: http://finance.yahoo.com/news/Range-Pro ... l?x=0&.v=1
They do have this issue to contend with:
From Raymond James "Energy Stat of the Week"
The Marcellus shale is one the largest continuous shale plays ever discovered. Because of its size, proximity to high gas demand areas, and the fact that it is a relatively uniform formation, this prolific shale provides unique opportunities for drillers. However, producers will need to find ways to dispose of the ethane that is processed from Marcellus gas or be faced with production shut-ins. To make matters worse, there is essentially no end-user demand for ethane in the Northeast and, at the present time, there is a lack of infrastructure in the Marcellus shale to export ethane to areas where demand does exist. While there are several projects in the works to expand NGL takeaway capacity out of the Marcellus, whether or not there will be sufficient capacity to handle growing Marcellus ethane supplies depends largely on 1) if and when these projects are completed, and 2) the pace at which wet gas production in the Marcellus ramps. Furthermore, the economics of such projects are largely based on NGL markets placing a premium on Mt. Belvieu (Gulf Coast) ethane, which could quickly erode and no longer warrant paying the incremental transportation costs associated with moving ethane from the Northeast to major petrochemical markets along the USGC. That said, moving Marcellus ethane to the USGC appears to be the most viable option at this time given the Gulf Coast ethylene industry's historical track record of being able to absorb growing supplies of ethane at a relatively quick pace.
Read this: http://finance.yahoo.com/news/Range-Pro ... l?x=0&.v=1
They do have this issue to contend with:
From Raymond James "Energy Stat of the Week"
The Marcellus shale is one the largest continuous shale plays ever discovered. Because of its size, proximity to high gas demand areas, and the fact that it is a relatively uniform formation, this prolific shale provides unique opportunities for drillers. However, producers will need to find ways to dispose of the ethane that is processed from Marcellus gas or be faced with production shut-ins. To make matters worse, there is essentially no end-user demand for ethane in the Northeast and, at the present time, there is a lack of infrastructure in the Marcellus shale to export ethane to areas where demand does exist. While there are several projects in the works to expand NGL takeaway capacity out of the Marcellus, whether or not there will be sufficient capacity to handle growing Marcellus ethane supplies depends largely on 1) if and when these projects are completed, and 2) the pace at which wet gas production in the Marcellus ramps. Furthermore, the economics of such projects are largely based on NGL markets placing a premium on Mt. Belvieu (Gulf Coast) ethane, which could quickly erode and no longer warrant paying the incremental transportation costs associated with moving ethane from the Northeast to major petrochemical markets along the USGC. That said, moving Marcellus ethane to the USGC appears to be the most viable option at this time given the Gulf Coast ethylene industry's historical track record of being able to absorb growing supplies of ethane at a relatively quick pace.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group