Add more Gas to your portfolio
Posted: Sat Sep 10, 2016 12:49 pm
Comments below from Lou Powers, an EPG Founding Member:
This week, Art Berman posted a new article on the pending U S Natural Gas Shortage . Here is the link.
http://www.artberman.com/one-hundred-ye ... se-prices/ Bottom line current natural Gas price $2.80- $3.00 are insufficient to justify gas drilling in most areas of the United States, see attached graph of natural gas rigs. Note while there has been some pick up in oil drilling this last month but no pick up in gas drilling, yet.
In my book published in 2012 by PennWell that can be used today to evaluate what gas price today is needed in most basins to justify gas drilling. In one case I used a 25% reduction in development costs which is probably okay for today in most fields to determine what was is required for profitable gas development, ie at least a 2-1 return. This Figure is attached. The last row of numbers is for the Woodford shale. I am sorry my scan is not the best. Note there are no numbers for the Texas Eagleford shale. Note most Basins with a 25% reduction in Development costs over 2012 still require a $5.00-$6.00 gas price to make a 2:1 return. Note this is for a dry natural gas well(no liquid hydrocarbons). Liquids could drop the price to the $4.00-5.00 price range.
Berman is predicting natural gas prices this winter in the range of $4.00/mcf this Winter. The current Dec-Jan 2017 natural gas future prices are $3.10-$3.30/mcf, respectively. Note how the storage picture is changing from one of surplus to tight as the shale gas wells in particular are declining each month. See Attachment III This shows a flattening in gas storage and if the trend continues we could be well with in the five year average instead of a surplus we had last winter.
This week, Art Berman posted a new article on the pending U S Natural Gas Shortage . Here is the link.
http://www.artberman.com/one-hundred-ye ... se-prices/ Bottom line current natural Gas price $2.80- $3.00 are insufficient to justify gas drilling in most areas of the United States, see attached graph of natural gas rigs. Note while there has been some pick up in oil drilling this last month but no pick up in gas drilling, yet.
In my book published in 2012 by PennWell that can be used today to evaluate what gas price today is needed in most basins to justify gas drilling. In one case I used a 25% reduction in development costs which is probably okay for today in most fields to determine what was is required for profitable gas development, ie at least a 2-1 return. This Figure is attached. The last row of numbers is for the Woodford shale. I am sorry my scan is not the best. Note there are no numbers for the Texas Eagleford shale. Note most Basins with a 25% reduction in Development costs over 2012 still require a $5.00-$6.00 gas price to make a 2:1 return. Note this is for a dry natural gas well(no liquid hydrocarbons). Liquids could drop the price to the $4.00-5.00 price range.
Berman is predicting natural gas prices this winter in the range of $4.00/mcf this Winter. The current Dec-Jan 2017 natural gas future prices are $3.10-$3.30/mcf, respectively. Note how the storage picture is changing from one of surplus to tight as the shale gas wells in particular are declining each month. See Attachment III This shows a flattening in gas storage and if the trend continues we could be well with in the five year average instead of a surplus we had last winter.