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United States Natural Gas ETF Message Board

  • joelm_shapiro joelm_shapiro Mar 27, 2013 5:56 AM Flag

    It's not the weather, stupid

    Yes, the weather is helping to relieve the excess inventory, but the reason natural gas is strong is because the rig count is barely over 400 and the producers are estimating production declines at or above 5%. You guys need to do a little more actual research and not just watch the weather channel.

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    • Rather than look at rig counts, the most important production factor is dry gas drilling budgets which have been cut dramatically by natural gas producers for the past 12 months extending into 2013. $4.50 - $5.00 natural gas is needed to bring back these budgets.

      The other issue which is rarely discussed is the annual depletion rates of shale gas wells which are 30 - 50% annually. Unless new wells are drilled, then production will decline because of depletion.

      Sometime in 2013 the reduced drilling budgets and depletion should cause natural gas production to go into decline.

      Keep in mind that this production decline is the objective of the reduced drilling budgets so that the industry is restored to profitability.

      The US has a lot of natural gas but prices of $5 + are needed to justify budgets for continued drilling.

      • 1 Reply to gray1808
      • Gray;
        I agree that rig count data alone is not very meaningful. I read the transcripts of the major NG producers, and they are moving capex away from NG to NGL and oil. It is hard to pick a US average NG price that will lead to increase NG drilling as every shale play has different economics. My data suggest that even at $4 - $4.5 - if these prices stay above $4 for several months in a row - will lead to increase NG drilling activity. Then you need to add in the time lag for supply to actually increase. Demand is increasing and supply is flat to down so prices will continue to rise IMHO.

        As we move into warmer weather and now that prices are above $4 we could see stranded NG, and NG being held back from the distribution lines to start to flow. Firms are now looking at all the NG flaring - to shift to investing in the infrastructure to stop the flaring....I do not think this will make up for the natural production declines from existing wells..

    • Their fracking technical still improved and much more efficient than before. Furthermore, they have already drilled many wells but put them in idle. If need, these wells can produce the gas right away. So rig count really does not matter at all.

      Last year they cut the rig count in half but produced a lot more gas.

    • Marcellous has unlimited NG and is more efficient in pumping out NG than any RIGs. The cost difference made a switch over to Marchellous from RIGS. I don't think you have done your home work.

    • good point mr. shapiro. people think that bc it is cold or hot in the NYC area UNG reacts. just wait until there is a need for more GAS for the trucking industry. This UNG may trade back up to over $400

      Sentiment: Strong Buy

    • I understand what you are saying and most do focus in on weather patterns to the exclusion of all else. However, it must be said that the rig count may not just be due to producer price manipulation. It could also be due to increased efficiency in existing and new wells. The Marcellus is due to be the lion share of U.S. usage. To the point that we are for the first time considering exporting gas. Rumors are that those rigs are profitable at $1.90 and very profitable at this current price. I will leave an article for your consideration.

      http://seekingalpha.com/article/1299661-marcellus-fuels-69-jump-in-pennsylvania-natural-gas-production-despite-plunge-in-wells

    • In the past as NG prices went up so did production. Producers trying to get as much as they can before prices drop again. Rigs that they shut all of a sudden became feasible to open again. I am sure some producers are hurting because of last years low price. They need the money. The way to get it, produce as much as you can... I hear a lot of analysis about production dropping. I am not buying it. Greed is not dead and will again drive prices down.

 
UNG
13.24-0.220(-1.63%)Apr 17 4:00 PMEDT