EIA Has Lost All Credibilities in It sNatural Gas Production Data!!!
You probably don't know, But the monthly natural gas production data EIA released are NOT calculated from tallying actual production data. Instead they are calculated from a data model, using raw data from a private data research company, who in term model their data from data published on public web sites by state agencies, based on data that are several months old.
If you do not believe that EIA data can be totally off. Then go to their web site and analyze the monthly gross withdrawals from wells. Here are the numbers I obtained.
I divide the monthly numbers by number of days in the month (31 days for January and 29 days for Feb. 2012, for example) to obtain the daily rate which is more smooth. The third column is change from last month:
8/1/2011 76.466 1.29%
9/1/2011 78.606 2.80%
10/1/2011 80.722 2.69%
11/1/2011 82.532 2.24%
12/1/2011 82.056 -0.58%
1/1/2012 83.004 1.15%
2/1/2012 82.003 -1.21%
3/1/2012 81.847 -0.19%
4/1/2012 81.499 -0.43%
5/1/2012 81.613 0.14%
6/1/2012 80.675 -1.15%
7/1/2012 79.298 -1.71%
8/1/2012 76.582 -3.42%
9/1/2012 80.939 5.69%
10/1/2012 82.861 2.37%
11/1/2012 83.535 0.81%
The gross withdrawal peaked in Nov. 2012 at 82.532 BCF/day, dipped slightly in Dec. 2012, and then peaked again in Jan. 2012 at 83.004 BCF. It has been gradually dropping ever since, which is expected as drilling rigs plummeted.
It dropped by -3.42% to 76.582 by Aug. 2012, which is completely within expectation. But then what happened afterwards?
It gained +5.69% in Sep. 2012. This is the largest monthly gain ever in the history of natural gas production. What rid activities existed in Sep. that explained that kind of month-to month growth?
In just three month, the gross withdrawal went from 76.583 BCF/day to 83.535 BCF/day. A 9.1% gain in three month during a time that rig count has dropped to less than half of previosu level. This growth during these three month is much faster than the growth in late 2011.
How could that be possible? I don't beieve this data.
The PA DEP data on Marcellus production finally proves that I am right.
The EIA data on shale gas production is COMPLETELY OFF, especially on Marcellus.
But at least by now I know the EIA data on Marcellus production is off. According to EIA, who ontained the data from Bentek, the Marcellus production averaged 6.873 BCF in H2-2012.
The PA DEP data, as discussed above, indicated an average production of 6.233 BCF/day in H2-2012. So the EIA data was off by 0.64 BCF.day. That is a pretty significant discrepancy.
CHK has just reported Q4 result.
The result of CHK once again demonstrated how ABSURD the EIA data is. In the EIA data, there is so far NO SIGN of any natural gas production drop whatsoever.
But CHK reported natural gas production of 280 BCF in Q4 versus 302 BCF in Q3. Both quarters are of 92 days. So that's -7.285% quarter-over quarter production drop, or -26% drop annualized!
The fact of the matter is the drop is NOT because CHK shut down any wells. The natural production decline takes care of the drop once new well addition slows down.
I can extrapolate that similar production drops happened to almost all producers who like CHK, also shifted their rigs from gas to oil/liquid.
The daily drop rate of CHK's NG production is roughly -0.083% per day. In my data survey of all shale gas plays, with NO new well addition, the existing wells as a group drop at -0.2% per day. With adequate quantity of new well addition, the drop would be 0.0%/day. With only half as many new wells added as needed to maintain production, the production drop would have been -0.1%/day. So the -0.083%.day drop implies that CHK is only adding 2/3 of needed new production to maintain flat production.
The truth is if NG keeps falling which will happen your coal stocks would be in alot of trouble. Why dont you just confess you need NG at much higher prices so coal stocks can have part of the market? Dont be surpised if they tank NG to 2 dollars so the NG drillers can take over the market in generating electricity. One more bad year for coal can wipe out 25% of the coal companies. Also remember that this year we may need far less natural gas to produce electricity as i doubt we have a hot summer like last year creating a larger supply in NG.
This is all joke, alright?
I extracted the Marcellus part of the data, it looks to me like a complete joke. Let me paste all the Marcellus data here, so you can judge whether this is ridiculous or not:
Dry shale gas production (Billion cubic feet per day)
Marcellus (PA and WV)
It can be seen much clearer, if you plot the data into a chart. The chart basically is composed of two straight lines. One straight line is from Jan. 1 of 2007 to Dec. 31 of 2009. It was flat, very low production and virtually no growth. It took three years and production grew from 0.02 BCF/day to 0.128 BCF/day. Effectively no growth.
And then magic happened in Jan. 2010. The production suddenly jumped from 0.128 BCF/day to 0.482 BCF/day. And from then on it was no stop, constant growth at a uniform rapid pace.
From Dec 31, 2009 up to Dec. 31, 2012, latest data available, the Marcellus production was basically a STRAIGHT LINE, going from 0.2 to 7.4 BCF/day in a straight fashion, adding exactly 0.2 BCF/day production rate each month. The growth was so uniform and so linear, it looks like rig count, well count, well declines, production rate change are all irrelevant and all had NO IMPACT on the production. It was just a straight line.
That is just absurd!
Here is proving that EIA's own natural gas production data is all wrong, using EIA's own data to contradict itself:
Look at the gross well withdrawal numbers. EIA categorize the gross withdrawal into 4 categories:
1. Withdrawal from conventional natural gas wells
2. Withdrawal from gas from conventional oil wells.
3. Withdrawal from coal bed methane wells.
4. Withdrawal from shale wells.
Let's look at the numbers:
1. Conventional well production has been in decline since 2007. No one drills any new conventional well any more. So from EIA's data we see that in Nov 2006, conventional gas production was 1500 BCF. By Nov 2011 it dropped to 1000 BCF. That's losing 8% to 9% a year. So you expect the conventional production by Nov. 2012 to be at 910 BCF level.
2. Coal bed methane is a small quantity, and in recent years has been declining at roughly 6% a year. It was 166 in Nov. 2009 and 146 BCF in Nov. 2011. So I expect it to be 137 in Nov 2012.
3. Withdrawal from conventional oil well fluctuates but is around 500 BCF level. Consider oil production is up roughly 10% from Nov 2011 to Nov 2012. Let me assign gas from oil wells at the 550 BCF level.
4. Finally EIA provides a chart of shale gas withdrawal which shows no slow down whatsoever in Marcellus, despite of a lot less new wells being drilled. I suspect they over-estimated shale well production growth. But let's take their shale well numbers as they are. In Nov 2012 US shale gas production was 26.7154 BCF/day, or 801 BCF for the month.
Summing up all four above: 910 + 137 + 550 + 801 = 2398 BCF for Nov 2012.
But EIA reported Nov 2012 gross withdrawal at 2506 BCF level. They over-estimated by 108 BCF!
That's a huge discrepancy. I am only showing that EIA's own data is inconsistent.
How can EIA reconcile with the fact that all shale wells decline at a collective -0.2% per day, or losing half of production rate in one year. They are modeling production as if there is no well declines. They modeled Marcellus production like a straight line up. That is absurd.
He believes there is a vast conspiracy of companies, government and even Seeking Alpha is in on it to cover up the fact that NG is really in short supply and the record storage we have is just a mirage.
He believes Seeking Alpha is in on the conspiracy and banned him to prevent him blowing the whistle. It could not be that he made himself a laughing stock on that forum by posting articles for a couple of years, every one of which was filled with basic errors and every prediction turned out catastrophically wrong. For example, according to his last articles before he was banned, Patriot Coal would be at $120/sh by now and JRCC would be at $60. Instead, Patriot is in bankruptcy and JRCC languishes at $3. He misled gullible investors for years who were dazzled by all the math in his articles and didn't realize his basic premises and assumptions it all rested on were completely wrong. This guy not only lost almost all his own money several times over (most recently moving 'massively' into PCX just before they filed BK), but also probably cost other readers a lot of money too.
The question is not why he was banned, but why did Seeking Alpha not ban him earlier seeing the damage he was doing.
P.S. You know his reasoning for PCX going to $120 and JRCC to $60 when they were in the low single digits? That they had dome so before. That's it. No further justification than it had happened before (under completely different market and regulatory conditions, of course, and at a time when NG was much higher priced than today).
First, I agree that the EIA numbers vary from astonishing to ridiculous.
However, the numbers from August to September 2012 are due to the hurricane that came through the Gulf. Production went down, then recovered.
I believe in the principle that anyone who believes in man made global warming is so far out in space that they could believe anything. Since there are some in our government, including the idiot in chief, who propogate the nonsense about man made global warming - it is entirely possible we are receiving nonsensical numbers on natural gas production - and the people propogating these nonsensical numbers are unaware of how absurd the numbers are.
Whether the numbers on natural gas production are nonsensical or not - it is only a matter of time before the price received for natural gas balances with the cost of production of natural gas. This number is unknown but is probably somewhere between $4 and $10 with more recent estimates trending toward the $10 figure.
You stated that: "Whether the numbers on natural gas production are nonsensical or not - it is only a matter of time before the price received for natural gas balances with the cost of production of natural gas. This number is unknown but is probably somewhere between $4 and $10 with more recent estimates trending toward the $10 figure."
I believe the truth break-even gas price is at $10/mmBtu level. I agree that in economic 101, price has to reflect fair production costs and it must eventually move towards the real cost level.
However there are a lot of fuzzy math figuring out where that level is, because there are huge uncertainties in shale wells' future productions. You will NOT know the precise totally tally of the exact profit or loss of a shale well, until many years later when the well is finally shut down and demolished at the end of its production cycle. Only by then, you will know every cubic feet of gas it produced, and even penny of revenue it generated, as well as every penny of cost spent.
Using an analogy. An auto maker can figure out its profit or loss pretty quickly. As soon as a vehicle is rolled off the production line, you know the total cost already: the cost of every bolts and nuts and other parts, the labor cost, and all other costs needed to put a car together. As soon as the vehicle is delivered to car dealers, you know the precise revenue that the dealer pays you. So figuring out the break even price of a car is much easier.
However, shale well costs a lot of up-front money to drill, and then you do not know the ultimate production it may bring. This makes the cost calculation much harder, especially when the producers are exaggerating the EURs of shale wells. Let me use another analogy:
Let's say you build a house for $0.5M and rented the house to a family for $1000 a month. You claim that this business of building a house to rent it out is profitable by such calculation:
1. The house will last 50 years with little maintenance.
2. Thus the expected rental income in 50 years is $1000*12*50 = $0.6M
3. You spend $0.5M investment and recovered $0.60M rental income. So you made 20%.
4. Thus, $1000/month rental income is profitable, and the break even rent is $833.33/month
That is essentially what shale gas companies do in calculating costs. They claim a shale well will last 40 to 50 years. But just like the above analogy it is ridiculous:
1. The house may not last 50 years before major repair is needed.
2. Making 20% return in 50 years is ridiculous. A sound investment need to see the capital fully recovered in just 5 to 10 years, and then it continue to generate stream of income.
However you calculate the truth cost, the truth is ever since the start of the shale gas revolution, the industry accumulated HALF A TRILLION DOLLARS of debts directly related to shale. What profit do they have to speak for, when you incurred a net debts of half a trillion dollars?
It is going to end badly, as investors figure the math does not work out. Once the capital flow stops, there is no more money available to drill more wells. The entire sector will collapse, leading to a natural gas supply crisis. A half trillion dollars worth of debt crisis is going to take quite a few years to sort out, before the natural gas sector returns to some normalcy.
I would say you are the one who has lost all 'credibilities' what with losing most of your portfolio on Patriot Coal and being banned from SeekingAlpha (articles, blogs, even comments) for posting so much misleading and incorrect information in your articles.
The truth is based on NGSA data, and based on other sources, natural gas production is probably already dropping rapidly!
Don't believe EIA's modeled data derived from private company data packages.
your JRCC about 2.90 a share your ACI tanked to about its lowest level and will tank harder once they let you know how badly they didnt in thier quarterly report, your WLT is at 36 dollars a share down from 75 dollars a share, your PCX went bankrupt, and coal prices dropped from 120 a ton to 50 a ton, coal companies are selling coal at break even and some at loses.