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United States Natural Gas Message Board

  • pinvestment pinvestment Feb 17, 2013 11:40 PM Flag

    from UPL conference call on how production drops over two years and nat gas goes over $5

    Why? I mean, I think it's falling because people are withdrawing capital. We're not the only ones that have reduced capital. We were probably earlier and more aggressive just because we're 100% natural gas. But even our big partners, Shell and Anadarko, have seen the wisdom of withdrawing capital from the dry gas plays. And it takes a long time to make the decision to withdraw capital and shutdown those rigs or move them to a different area. But once you do it, if it's sticky on the way down, it's going to be a whole lot stickier on the way up, because you're not going to want to commit capital and go get permits, and build locations and sign new rig contracts, and get crews and redirect your staff, until you know that you can put forth a pretty significant capital program over several years. So gas prices going from $3.25 to $3.75 is not going to get anything done. And so there's no doubt that tremendous amount of capital has been withdrawn. And all the international JVs, all those things are nearing their end in terms of outspending cash flow by gross amounts. All that just means less and less CapEx. And we have declines. This stuff declines, people don't understand that, and they want to put a light switch to it, where you just flip the switch, where rig counts drops, they want to see production drop. It doesn't work that way and it's not going to work that way, when rig count goes up, production's not going to go up. So there's no doubt in my mind that production is declining. Whether it's declining rapidly enough to get us closer to balancing with demand, I mean, we're not there yet. That's clear. But when you have days like yesterday, where you have a pretty good storage withdrawal number, but it's not quite what the average was and you have a significant falloff in gas prices because money flows in the futures markets, it's just kind of you scratch your head and say, okay, where's the fundamentals of the business?

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    • NG production has flattened over the past 2-3 months. NG prices 3.25 - 3.75 will not entice much new investment. We will need sustained prices over $4, for 4-6 months to get meaningful capital deployed into NG. With flat production we will see prices rise from April - end of year, as non-weather related demand continues to rise, while production stays flat...Prices by end of each month according to my economic pricing model:
      2-Jan-2013 $3.44
      1-Feb-2013 $3.29
      4-Mar-2013 $3.39
      3-Apr-2013 $3.72
      4-May-2013 $4.11
      4-Jun-2013 $4.41
      4-Jul-2013 $4.66
      4-Aug-2013 $4.86
      4-Sep-2013 $5.00
      4-Oct-2013 $5.09
      4-Nov-2013 $5.19
      5-Dec-2013 $5.35

    • Ultra is often cited as "the" low cost producer that can still spin gold out of straw.

    • sorry forget to give seeking alpha the credit for the transcript from the UPL conference call that was cited above

 
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21.04+0.32(+1.54%)Jul 29 4:00 PMEDT

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