Fracking question

[ko10068]

Can propane be used in fracking and is it cheap to use in fracking?

[cviller]

Go to the Gasfrac (GFS.to) web site and read about it. That's their business. Whether it will catch on, I don't know.

[prince_jake_33]

HOUSTON -(Dow Jones)- Chevron Corp. (CVX) said Tuesday it has tested propane as an agent for hydraulic fracturing of various shale gas wells in Colorado, a move that could potentially reduce the large amounts of water used to extract oil and natural gas.

"This fall, Chevron tested the use of liquefied petroleum gas (LPG) as a fracturing agent in five natural gas wells in its Piceance Basin development in northwestern Colorado," Chevron spokesman Russell Johnson said in an email. "We are now evaluating the test results to determine the potential usefulness of the technique."

Chevron's test comes at a time when hydraulic fracturing--a technique also known as "fracking"--has come under scrutiny from environmentalists and others who fear it poses a threat to public health through groundwater contamination and air pollution. It also uses massive quantities of water, a concern in many Southwestern states currently affected by drought. Finding an alternative for water in the fracking process could be key for Chevron and other oil companies that have recently acquired large land positions in shale formations across the U.S. and Canada.

Fracking involves the high-pressure injection of water, sand and chemicals into a shale seam, causing the rock to shatter and releasing oil and natural gas. In propane fracking, water is replaced by a liquid propane gel that is pumped into the shale rock wells under extreme pressure.

[ko10068]

Thanks prince_jake_33 & cviller.

The reason I asked -- I'm thinking NRGY might benefit here. Currently @ $17.23, down $5.34, with 9.3 million shares traded
on news of a divi cut and propane business slowdown.

[dan_s]

We dropped NRGY from our MLP Watch List a month ago. Looks like we timed that right..

The Midstream MLPs on our Watch List appear to be in a sweet spot. Demand for gathering, processing and transportation is very high these days.

[dan_s]

...Inergy LP (NRGY), a propane supplier and natural-gas storage operator, fell the most since going public after saying it may cut distributions and is reviewing operations as mild weather reduces fuel demand.

Inergy declined 24 percent to close at $17.33 in New York, the biggest drop since the shares began trading on July 26, 2001.

Inergy’s distributable cash flow for 2011 only covered 68 percent of its distributions, the Kansas City, Missouri-based company said in a statement attached to a filing today. Market conditions in its propane business and gas-storage operations in Texas “remain challenging,” according to the statement.

Inergy’s propane sales have been hurt by the warm winter, Ethan Bellamy, an analyst at Robert W. Baird & Co. in Denver, said in an interview today. Companies often store gas during the summer and sell it in the winter at a profit, he said.

“That seasonal arbitrage has really been crushed” by the warm weather and an oversupply of gas, said Bellamy, who rates Inergy’s units “underperform” and owns none.

Inergy is cutting costs in its propane business and considering reducing distributions to a level that matches expected cash flow, according to the statement.

Inergy may see more cash flow from its pipeline business in 2012, Mark McCabe, an analyst with KDP Investment Advisors Inc., wrote in a note to clients yesterday. The weather will continue to impact Inergy’s propane business, which will account for 60 percent of its first-quarter earnings before interest, taxes, deductions and amortization, he said.

Raymond James & Associates Inc. cut Inergy’s rating to “underperform” from “market perform” today.