Recent

% | $
Quotes you view appear here for quick access.

SandRidge Energy, Inc. Message Board

rainbow3100 38 posts  |  Last Activity: 21 hours ago Member since: Jul 1, 2010
SortNewest  |  Oldest  |  Highest Rated Expand all messages
  • Reply to

    rainbow please explain

    by juan_ton_amigo Jan 1, 2015 4:51 PM
    rainbow3100 rainbow3100 Jan 2, 2015 7:47 PM Flag

    Back in 2005:

    First, the EIA forecast in its "reference case" that oil prices would be around $25-$30 per barrel in 2013 with gasoline prices of around $1.50/gallon. The actual prices? More like $100 per barrel for oil $3.50/gallon for gasoline in the US market. That's off by a factor of 3-4 fold. The EIA also got the trend wrong in projecting that, from anticipated high levels throughout 2005, oil prices would decline gradually to $31 per barrel in 2010 then only to rise by about 0.8 percent per year to $35 in 2025. That's not even close even when considering the EIA's ‘high oil price case’ of $48/barrel by 2025. Of course, as the EIA put it at the time, "While the three cases [low, medium, and high price scenarios] vary widely, they do not span the full range of possible scenarios." That comment was eerily true given that oil prices increased to more than $100 per barrel and stayed extremely high for years. That wasn't even considered as a possibility by EIA in 2005 - in any of its projections.

    Now EIA has NG at 4 to 6mcf for decades to come. Will the EIA blow their NG forecast as badly as they blew the Oil call? Does anybody think that NG will be trading at 4 to 6 once the LNG exports hit? And what happens if Marcellus production peaks when exports, industrial use, and power generation are ramping up hard?

    Watch those legacy decline numbers closely in the Marcellus. The play still has some legs to it, but once it goes into decline, there is nothing left in the tank to ramp up production cheaply. Haynessville, Barnett Shale, Dry side Marcellus have plenty of reserves, but they won't get tapped until NG is in the 5.50 to 6.00 area, and maybe higher.

    Do I need to repost how the EIA blew the Monterey Shale by 96%? Long term forecasting is difficult, and the EIA's track record is abysmal!

    Juanton, at the end of October I went bearish on NG - stated that storage would surpass last year's level in late December. Low and behold it happened.

  • Reply to

    rainbow please explain

    by juan_ton_amigo Jan 1, 2015 4:51 PM
    rainbow3100 rainbow3100 Jan 2, 2015 8:54 PM Flag

    Forecasts for the longevity of the U.S. shale boom may be grossly overestimated according to an analysis conducted by scientists from the University of Texas at Austin’s department of petroleum and geosystems engineering.

    The USA is betting on an abundance of shale gas for many decades ahead. This optimism is reflected in the scale of investment in new plants relying on natural gas, building new pipelines and terminals to export liquefied natural gas (LNG) to Europe, Asia, and South America.

    All this optimism is based on predictions by the country’s Energy Information Agency (EIA) which says that, in the words of the agency’s director Adam Sieminski: “For natural gas, the EIA has no doubt at all that production can continue to grow all the way out to 2040.”

    The problem is that EIA has been known to be very wrong in its assessments in the past. Most recently in the Monterey Shale in California when it slashed its initial estimates by 96 per cent. Researchers who have been carrying out their own analysis of shale deposits have often accused the agency of being over-optimistic.

    Now, the work of researchers from the University of Texas at Austin’s department of petroleum and geosystems engineering puts into question EIA’s assessment of U.S.-based shale deposits.

    The results are “bad news”, Tad Patzek, a member of the University of Texas’ team told Nature Journal. With companies trying to extract shale gas as fast as possible and export significant quantities, he argues, “we’re setting ourselves up for a major fiasco”.

    And bad news in the U.S. might have repercussions not only on the country’s energy and manufacturing sectors. It would thwart U.S. ambitions to export LNG, as well as have a knock-on effect on shale exploration world-wide. “If it begins to look as if it’s going to end in tears in the United States, that would certainly have an impact on the enthusiasm in different parts of the world,” says economist Paul Stevens of Chatham House, a London-based think tank.

    According to EIA forcasts – released to Nature Journal – production from the big four plays (Marcellus, Barnett, Fayetteville and Haynesville) would continue rising quickly until 2020, then plateau for at least 20 years. But that’s not what the researchers at the University of Texas have found.

    If natural-gas prices were to follow the scenario that the EIA used in its 2014 annual report, the Texas team forecasts that production from the big four plays would peak in 2020, and decline from then on. By 2030, these plays would be producing only about half as much as in the EIA’s reference case. Even the agency’s most conservative scenarios seem to be higher than the Texas team’s forecasts. “Obviously they do not agree very well with the EIA results,” says Patzek.

    So what caused the discrepancies between the two predictions?

    The EIA breaks up each shale play by county, calculating an average well productivity for that area. But counties often cover more than 1,000 square kilometres, large enough to hold thousands of horizontal fracked wells. The Texas team, by contrast, splits each play into blocks of one square mile (2.6 square kilometres) — a resolution at least 20 times finer than the EIA’s.

    This yielded vastly different results because the more fine-grained Texas study took into consideration elements that the more coarse-grained EIA study ignored.

    For one, EIA assumed that future wells will be at least as productive as past wells in the same county. This is not likely to be the case since companies usually go for ‘sweet spots’ first and move to more demanding deposits later. It is therefore safe to assume that later wells will not be as productive as the earlier ones.

    The high resolution of the Texas studies allows their model to distinguish the sweet spots from the marginal areas. As a result, says study co-leader Scott Tinker, a geoscientist at the University of Texas at Austin, “we’ve been able to say, better than in the past, what a future well would look like”.

    Another difference is that in the Texas study allowances were made for areas where drilling would be difficult. For example under lakes or major settlements. EIA made no such allowances and as a result the estimate of the number of wells that are likely to be drilled in each play is higher than in the report prepared by the University of Texas.

    The University of Texas scientists are not alone in their pessimism. Studies by Weijermars, as well as Mark Kaiser of Louisiana State University in Baton Rouge and retired Geological Survey of Canada geologist David Hughes8, suggest that increasing production, as in the EIA’s forecasts, would require a significant and sustained increase in drilling over the next 25 years, which may not be profitable.

  • Reply to

    rainbow please explain

    by juan_ton_amigo Jan 1, 2015 4:51 PM
    rainbow3100 rainbow3100 Jan 2, 2015 8:59 PM Flag

    Berkeley

    The EIA has cut its original estimate of recoverable shale oil reserves in California's much-hyped Monterey shale play by 96%, the L.A. Times' Louis Sahagun reported late Tuesday.

    The agency now says there are just 600 million barrels of recoverable crude — as much as Bolivia. Previously the agency had said there were up to 13.7 billion recoverable barrels.

    The new estimate is expected to be released next month. Sahagun quotes EIA analyst John Staub:

    From the information we've been able to gather, we've not seen evidence that oil extraction in this area is very productive using techniques like fracking...Our oil production estimates combined with a dearth of knowledge about geological differences among the oil fields led to erroneous predictions and estimates.

    In December, the Post Carbon Institute published a report calling into question the EIA's initial estimate, noting that the Monterey's geology, while superficially similar to the country's marquee shale plays like the Bakken and Eagle Ford, contained unusual characteristics that would make it more difficult to access. In a statement last night the group said, “The oil had always been a statistical fantasy. Left out of all the hoopla was the fact that the EIA’s estimate was little more than a back-of-the-envelope calculation.”

    Since the report was published in California, lawmakers have been under tremendous pressure to allow fracking to proceed. Staring them in the face was an estimate that the Monterey shale could create up to 3 million jobs. Governor Jerry Brown had previously said fracking the Monterey presented "a fabulous economic opportunity," and last fall signed into law regulations that would allow the practice to continue in the state.

    Now all that seems to be derailed.

  • Reply to

    rainbow please explain

    by juan_ton_amigo Jan 1, 2015 4:51 PM
    rainbow3100 rainbow3100 Jan 2, 2015 9:08 PM Flag

    Juan Ton
    Hopefully these posts will clarify what I've been saying about the EIA. If you believe their long term forecasts you are a fool. NG will be heading much higher in the USA markets in the next few years, though I'm still bearish or at least not bullish on it until Spring to next summer.

  • Reply to

    So here is the deal..

    by neiljneil Dec 7, 2014 9:26 AM
    rainbow3100 rainbow3100 Jan 3, 2015 12:30 AM Flag

    You might like liberal California opinions better:

    Jayni Foley Hein, executive director of the Berkeley Center for Law, Energy and the Environment, said in a statement from the group CAFrackFacts. “Given that the industry’s promised economic benefits are not likely to materialize, the state should take a hard look at the impacts that oil development has on public health, safety and the environment.”

    California was really hoping for tons of economic development from the Monterey Shale, but the EIA blew the call. Oh well, California will probably just raise taxes again.

    SOCAL fooked up original economic projections later to be corrected by Berkeley and others. But it was the EIA statements that most relied upon, at least originally. Sad that it takes a University Of Texas Study to call out the EIA, most recently on the rest of the shale plays. But it's not surprising at all, as Texas has always been the heart of the Oil & Gas Industry.

  • Reply to

    Added more heges, now at 123B for 2015 at $4 average.

    by bqdoo Jan 12, 2015 8:39 AM
    rainbow3100 rainbow3100 Jan 12, 2015 6:52 PM Flag

    A Bcf is a thousand mmcf (million cubic feet), an mcf is a thousand cubic feet. An mmcf is a thousand mcf. If 123 Bcf is hedged at 4mcf, the revenue is $492,000,000. I own NG minerals and production as well as the stocks: the mcf, mmcf, Bcf, stuff can be confusing. Hope this clears things up for you.

  • Reply to

    rainbow please explain

    by juan_ton_amigo Jan 1, 2015 4:51 PM
    rainbow3100 rainbow3100 Jan 17, 2015 1:11 AM Flag

    There are going to be between 500 and 800 oil rigs that get laid down. Roughly speaking its about a 5 to 1 coefficient with NG rigs getting laid down. This is bullish for NG, it's like taking another 100 rigs off the NG Rig Count.

    However, I'm still not bullish NG short term, unless we get some serious weather and soon. Marcellus production has come on too strong and there is still a bunch of associated gas production that will come online shortly, even if the rigs get laid down. NG storage levels will end this winter much higher than last year.

    A bunch of coal plants will be retiring by summer and Mexico exports will continue to grow, then LNG exports hit year end to first quarter next year. It's a tough call as to when demand finally outstrips supply, could be as soon as this summer, likely by 2016 and almost a certainty by 2017 forward. Once the backlog in the oil fields gets worked off (particularly in the Eagle Ford) supply in oil as well as NG will slow significantly.

    NG demand is going to build radically in the next year for the US. Far more so than for US oil production. Oil is tied to global demand. NG is still pretty much stranded to Local markets in the USA (think the lower 48 and Canada and Mexico). Mexico will be more of an impetus than LNG exports for the next couple of years (train 1 at Cheniere will amount to .5bcfd by year end, train 2 coming in with another .5bcds in 2016 to 2017. It's going to be 2020 before the 6 to 8 bcfd of LNG hits the export market. Mexico exports should grow to an additional 2bcfd well before that, perhaps higher. Industrial demand is going to grow quite a bit, and coal power getting shut down will drive things upward Very Significantly. There will be a number of Nuclear Plants closing as well.

    I'm not bullish on NG at present and think its likely 2016 before we get a solid sustainable run. Hoping for a run in Spring to summertime, and weather will dictate much of this, we could get a good pop this winter as well, but I don't see a solid upward maintained Bull Market until 2016 or later. I'm sorry not to be more bullish at present, and don't forget that I'm a very strong bull longer term, it's just been a huge problem with the nagging Marcellus production growth and now the potential for Utica to come into play. And of course the weather dealt NG a tough hand over the summer and not much better so far this winter.

    JMHO, do your own DD, NG could turn on a dime and head much higher soon and usually does get a nice uptick in winter months, I just don't see it sustained as a result of supply injection into storage building radically at least until Spring.

  • Reply to

    Att O'll sidewinder (bow)

    by juan_ton_amigo Jan 17, 2015 11:26 PM
    rainbow3100 rainbow3100 Jan 19, 2015 3:26 PM Flag

    Some spots in the Haynessville are still profitable. But the majority are not. Consider that at its peak, there were 186 rigs drilling in the Haynessville. The Rig Count is now and has been less than 30 for several years (24 last time I checked).

  • Reply to

    Att O'll sidewinder (bow)

    by juan_ton_amigo Jan 17, 2015 11:26 PM
    rainbow3100 rainbow3100 Jan 20, 2015 10:20 PM Flag

    I keep in tune with Haynessville and Marcellus. Haynessville had a drilling frenzy to HBP the leases that were executed in 2006 - 2008. Once the companies got things HBP (held by production) they dropped the rig count down from 186 to 24. The Marcellus is experiencing a similar type of situation. Most of the Marcellus leases got tied up in 2010 on five year terms. Rig counts have come down in the Marcellus and will likely come down a bunch more once the lease terms hit expiration this year. Back in 2010, NG was trading at a premium in the Marcellus to HH, now it's down about a buck to HH because of the huge supply glut in the northeast basins and lack of pipeline capacity takeaway.

    We saw 19 NG rigs get laid down last week and 55 Oil rigs. Rigs will continue to get laid down as the Oil decline is here to stay for quite some time. I've been bearish NG since late October, but the Oil slide caught me by surprise (I'm not an Oil expert) but have been pretty good on my NG calls. I'm still not bullish NG short term. Once Marcellus production peaks, NG is going to go nuts. The consensus is that this happens by 2020, I think it happens by 2017 based upon decline curves and Legacy Production dropping like a rock. If we see a bunch more rigs laid down in the Marcellus later this year as I expect, the decline will definitely hit by 2017.

    Associated NG production in the Oil fields is going to decline radically as well. The amount of NG by field varies: only 15% in the Bakken, 30% or so in the Eagle Ford and 50% in the Mississippian Lime. If we see 500 to 800 Oil rigs get laid down, which is highly likely, it's the equivalent of laying down 100 NG rigs. And it's likely that we will see a few more NG rigs mothballed as well.

    Oil prices in the USA aren't going to come back anytime soon. NG prices in the USA are a different story as we are still largely decoupled vs global prices, far different than oil.

    Marcellus is the key to NG prices, the rollover on the leases that were executed in 2010 will happen this year, we can expect to see more rigs laid down in this field shortly. Backlog wells will get hooked up, but once the logjam is cleared in this field NG goes nuts. And this is all going to occur when NG demand builds at an incredible rate from Coal Plant retirements, exports to Mexico, LNG exports, and a huge demand from Industry as well as some transport demand. A bunch of Nuclear Plants are slated to retire as well.

    Summing things up, we have seen over 200 Oil Rigs get laid down and are heading towards 500 to 800 Oil Rigs set to rest. This is equivalent to at least 100 NG Rigs coming off line and it's going to have a major impact on US NG supply in the next couple of years. US NG prices will certainly rally as a result of less supply and huge demand build; which stocks will benefit or how to play the game on the futures market is up to each of us to decide. I'm not buying in just yet, but will be doing so once I see the Marcellus peak or get close to it.

    JMHO, do your own DD.

  • Reply to

    Att O'll sidewinder (bow)

    by juan_ton_amigo Jan 17, 2015 11:26 PM
    rainbow3100 rainbow3100 Jan 22, 2015 8:08 PM Flag

    Sabine Pass and Cove Point will definitely get built. Combined export capacity in excess of 4.0bcfd. I'm not sure about the rest of the LNG export terminals if Oil prices stay low. And I'm no expert on Oil prices. First Train at Sabine Pass comes online at .5bcfd later this year then there are another 3 trains that come online in the next couple of years, maximum exports at present of 2.0bcfd, though the plant could expand further by adding an additional 2 trains. This plant has firm commitments for takeaway capacity at HH plus 15% - it's going to happen.

    Cove Point won't be in play until 2018. And it's only around 1.0bcfd. This plant also has firm commitments for takeaway capacity and it's going to happen.

    Mexico exports are going to pick up steam. And in fact are doing so at present. Another 300mmcfd just got ramped up in the last week or two and will build to another 1.5 to 2.0bcfd in a couple of years. A lot of Coal Plants will get retired by this summer. And more on the way over the next few years - this will be big for NG although a lot of wind and solar is also coming online. Nuke plants are getting retired as well. Then there is Industry and to a lessor extent transport demand that is coming up in the next few years.

    Juanton and Trmarra think I'm some sort of a shill. That is not the case. I follow NG markets very closely and did extremely well in UGAZ last winter when I predicted that NG prices would rise to 5, perhaps 6 and they did so. Am doing very well in DGAZ this winter since I went bearish late October into November and am still bearish. Also, I called a double bottom in NG back in 2012 at around 2.20, it did go a bit lower after that, but not by much. I was real bullish NG in winter of 2013/2014 and thought that 4 would be the new floor, that was a bad call, and I stated that I blew the call months ago and have since turned into a bear short term. I'm very bullish longer term and will switch position when the winds of the market look favorable. In the mean time I see an imbalance of supply over demand. Weather has a lot to do with things, we got a relatively cool summer and a relatively mild winter so far in the USA. NG would be much higher if the summer were hot and the winter cold.

    We need to pay attention to Marcellus and Eagle Ford NG production, particularly the Marcellus.

    JMHO don't invest on anybody's advise or opinions on a message board. Consult you financial advisor or Juanton and Trmarra so as to insure that you make wise investments.

  • Reply to

    Att O'll sidewinder (bow)

    by juan_ton_amigo Jan 17, 2015 11:26 PM
    rainbow3100 rainbow3100 Jan 25, 2015 9:31 PM Flag

    You are probably right about Freeport in TX but that is 2019 if it goes forward. Trains 1-3 are fully subscribed, so it's likely to proceed. Maximum output is 1.7bcfd.

    Cameron LNG has approval as well for 1.7bcfd, and some construction has already commenced, and its fully subscribed and has FERC approval, but is pending final Permit approval (likely to happen). They evidently think they will get final approval or would not be moving forward with construction, though I don't know the extent of the construction at present.

    There are several others fully subscribed including Southern LNG and Golden Pass LNG for an additional 2.5bcfd, but they are not thru the permitting process. Congress is putting pressure on FERC and DOE to streamline the process and its likely that these plants that are fully subscribed will go forward, but its 2018 to 2020 before all of them will be going full blast.

    In the mean time those Mexico exports are coming on strong along with Coal and Nuke plants retiring and Industry demand increasing substantially. The transport sector may surprise us if the railroad companies get after NG. Everybody thinks it's all about 18 wheelers in transport, but rail and maritime could boost demand significantly and in short order.

    Looks like some cold weather is coming up, I'm going to unload DGAZ soon. I got a little greedy on UGAZ last winter though still did excellent in it. Don't want to make the same mistake this year with DGAZ. The 3X ETF's are like playing with dynamite. Your money can get blown up in a second, but its a blast when you are on the right side of the trade.

    Rig Counts continue to decline. In the past when oil has declined by 50% or more rig counts have gone down by 50% or so. We should see a total of 500 to 800 rigs get laid down. Associated gas is 22% on an overall basis with oil. The effects won't start to be seen until later this year into 2016 as there is a lot of backlog awaiting completion. Hopefully NG rig count stays low. SWN is the only company that is going to ramp up Rigs that I know of in the NG sector. I'm not looking for any significant increase in NG Rigs.

    So by 2020 there will probably be an additional 8 to 10 bcfd demand coming from LNG exports. Mexico will pickup another 2.0bcfd by 2018, maybe sooner, Utilities at least another 4bcfd, Industry another 2bcfd or more, maybe an extra bcfd from transport. At least 15bcfd of extra demand coming in the next 5 years and a bunch of it in the next two years.

    I think we will see rig count continue to decrease thru out 2015. And not move back in for a year or two until hedging opportunities assure decent prices out for 2 to 3 years in the futures markets.

    Thanks for your posts Ken, please keep them going. "Bow".

  • Reply to

    Att O'll sidewinder (bow)

    by juan_ton_amigo Jan 17, 2015 11:26 PM
    rainbow3100 rainbow3100 Jan 26, 2015 8:55 PM Flag

    I don't post 10 times a day with needless dribble. My posts are backed up with facts and well thought out opinions. Think about associated gas production of 22% of overall NG production. It's about the same as total Marcellus/Utica production. If we see 50% of rigs laid down in the Oil fields, that associated gas is going way down.

    The rest of the NG in the older fields continues to decline at 8 to 10% per year. You have Marcellus/ Utica and associated NG from new shale plays contributing around 45% of overall supply.

    So here are some numbers for you. Older field decline of 10% on basis of 40bcfd = 4bcfd decline this year. Associated gas will continue to grow this year - maybe by another 1bcfd until q3 or q4, then it's done and starts to decline. Marcellus/Utica continues to grow, perhaps as much as 4bcfd this year (doubtful) but let's just assume it does so. By EOY, heading into 2016 overall supply should finally be in decline.

    The kicker is that demand is going nuts in the next few years. Marcellus/Utica isn't going to be able to keep up with it unless NG prices rise hard, fast, and soon. MHR has totally eliminated drilling, most companies are going to cut CAPEX by at least 25% this year.

    I'm still a bit bearish NG short term, sold 50% of my DGAZ today (very tough to do so as I think NG is still going down short term) I just didn't want to get greedy and am now playing with house money.

    It's tough to call the tops and bottoms, I still think NG is going lower for another couple of months. But I think it's going much higher in the next couple of years.

    JMHO, consult your financial advisor or Juanton and Trmarra for advise and diversify.

  • Reply to

    Att O'll sidewinder (bow)

    by juan_ton_amigo Jan 17, 2015 11:26 PM
    rainbow3100 rainbow3100 Jan 27, 2015 8:10 PM Flag

    I bend an elbow from time to time and Wild Turkey Russell Reserve is some good whiskey. Don't care for the regular Wild Turkey, and I'm more of a Single Malt Scotch guy when I drink whiskey, which is seldom to rare. I prefer wine for the most part. However, I do like a Beer after a hot Texas afternoon.

    What about you? Posting at 3:00 or 4:00am in the morning? Are you a Security Guard on the graveyard shift at the local junkyard? Or are you just high on meth and can't come down - sleep avoiding you while you desperately reach out for attention on a MB at ungodly hours of the night?

    I'll post later about Rig Counts. I try to provide some insight into the industry. Any chance that you could do the same and quit the antagonism?

  • rainbow3100 by rainbow3100 Jan 27, 2015 9:35 PM Flag

    For those that are not familiar with the gains in drilling efficiencies. Art Berman (a respected Petroleum Geologist) recently wrote an article about it. It's quite amazing actually, many of the current rigs are on pads and can drill about 3 times as fast as they used to be able to do so.

    The impact of this is enormous, particularly in the Eagle Ford, Bakken, and Marcellus where Pad drilling encompasses the vast majority of Rigs in operation. Laying down 1 Rig in these plays is like what laying down 3 rigs would be in the past. The Permian is not effected as significantly.

    Mr. Berman goes on to explain that the wells getting drilled are becoming of poorer quality, yet the output per rig continues to climb due to the E&P companies having been able to steadily decrease the amount of time it takes to drill a well. In other words, the sweet spots are already getting drilled out and the companies will have to move to less favorable rock in the future which will require higher NG and Oil prices to make sense.

    CAPEX is going to be way down across all of the fields and production is going to go down. It probably won't be evident in the USA until q4 or early next year, OPEC may intervene in the mean time, though many think that they will not decrease production until USA companies give up. The majors have for the most part already given up on Shale Plays. MHR and a few other smaller companies will not be drilling anything this year. The vast majority of companies are slashing CAPEX.

    Companies with good acreage in the sweet spots should do well in the future, those that were late to the game will not do well.

    Now is likely a good time to be buying the Oil & Gas companies with good acreage and decent balance sheets. JMHO, consult your financial advisor before making any investments and stay away from the 3X ETF's unless you really like to gamble or think/know you are smarter than the crowd. They don't call NG the widow maker for nothing, on the flip side you can do real well if you don't get too greedy. NG is highly volatile, I think it's still going down short term but is going to rebound incredibly by EOY to Q1 2015 when Sabine Pass comes online, Mexico Exports ramp up and many Coal Plants have retired with a Rig Count way down.

  • Reply to

    Rainbow - thoughts on Cheniere Energy?

    by nikonikos1234 Jan 29, 2015 7:39 PM
    rainbow3100 rainbow3100 Jan 29, 2015 11:48 PM Flag

    I bought Cheniere Energy (LNG) years ago at $8.00 and am out now. They will continue to be a viable company if they don't get to far ahead of themselves, their contracts are at HH plus 15% and the buyer is responsible for sourcing the NG. The big gains are over in this stock as far as I can tell.

    NG in India, China, and elsewhere in the Asian markets is based upon Oil prices for the most part. The price varies but it's basically at BTU equivalent of between 6 to 8 with Oil on the LNG imports. In other words if Oil is at $100, LNG is around 15mcf - this was a huge impetus for USA companies to go forward with LNG exports.

    The Economics are not nearly as good now with Oil at $50.00 and Asian countries are not likely to further subscribe to US LNG exports at present. The cost of transport and liquefying is around 6mcf to get it to their markets. If Oil is at 50, that translates to 8 NG plus associated transport and processing costs. Australia is much closer to Asian markets and will be able to undercut US Exports if Oil remains down for some time.

    European markets are cheaper regarding transport, and potentially a good market for USA exports in view of problems with Russia. However, Russia wants to sell their NG and can pipeline it far cheaper than the LNG process. Europe will have to decide to whom they wish to Allie, USA likely coming out on top due to political realities and reliabilities, but pricing trumps things in the long run. Russia can compete very favorably in terms of the delivered price to Europe - pipelines are a lot cheaper than the LNG chain.

    The supply chain in the USA is not infinite, in fact it is way over estimated. Marcellus/Utica is the only NG field growing significantly. Eagle Ford is growing as well, but its associated NG and is likely to taper off soon.

    I'm still bearish NG short term. At 2.50mcf there should be a bunch of Coal to Gas switching. And there are a bunch of Coal Plants soon to be retired - I don't know how much Coal is Stockpiled at these plants, they will likely burn all of it before retiring, so the C to G may not be as high as some expect.

    Looking out longer term, particularly concerning the Marcellus/Utica, there is going to be a lot of pipe laid, a bunch of it headed towards the GOM as well as the constrained NE markets. Marcellus trades as much as a buck below HH, this variance will narrow once the infrastructure is in place. It will be a favorable turn for companies in this basin.

    Pinedale isn't that great (for NG) Haynesville is very expensive to drill and with 24 rigs vs 186 at it speak speaks for itself. It won't add to supply unless NG heads significantly higher.

    JMHO, companies with good balance sheets and acreage should do well in the future, the majors have gotten beaten up a bit as well and make for good dividend plays at present.

    Buy when there is fear in the streets - Oil and NG are not going to stay down indefinitely - layer in on a monthly basis for the next 12 - 24 months and you should do well - diversify. JMHO, GLTA to all. Don't invest on what somebody says on a MB.

  • rainbow3100 by rainbow3100 Jan 30, 2015 5:07 PM Flag

    HOUSTON – Petroleum producers took 94 oil-drilling rigs off the market in the United States this week as sub-$50 oil continued to wreak havoc on the oil industry, Baker Hughes reported Friday.

    It was the biggest one-week decline for oil rigs since 1987, the earliest year of Baker Hughes data available. That year, the oil industry had faced another oil bust that left hundreds of rigs idle or repossessed by banks, which sold them for scrap.

    This week’s drop left 1,223 oil units up, the lowest number in three years.

    In Texas, 58 rigs were taken off the market, cutting the state’s count to 695 rigs. That’s down from 840 at the beginning of this month.

    All told, the number of oil and gas rigs active in the United States fell by 90 to 1,543, as gas rigs increased by three and one other, so-called miscellaneous rig was propped up. The U.S. offshore rig count declined by 5 rigs, down to 49 units.

    The decline came a day after the CEO of Helmerich & Payne CEO John Lindsay told investors the Oklahoma-based drilling contractor may have to cut 2,000 jobs in light of the falling rig count.

    Lindsay said even some of the company’s souped-up FlexRigs, some of the most advanced models on the market, have been released, and that’s likely to continue.

  • Reply to

    Rig Count

    by rainbow3100 Jan 30, 2015 5:07 PM
    rainbow3100 rainbow3100 Jan 30, 2015 10:25 PM Flag

    Rig Count down 386 or 24% since its peak. Associated NG represents 22% of production per rig. It's like laying down 75 NG rigs. I think we will see close to 800 rigs get laid down before this is over - it's happening fast!

    The Flex Rigs are the ones that drill multiple rigs from a single pad. Those have a huge impact and I wish there was a separate count for them. Regardless, the impact of so many rigs getting laid down is enormous. We should see impact on supply by Q4 heading into next year.

    In the mean time, Marcellus/Utica production continues to grow and I'm still bearish (short term) NG as a result of the lackluster withdrawals from storage. The storage levels are higher than last year at this time and will soon over take the 5 year averages and build from there - this is bearish and I called the trend back in late October.

    The big question is when Demand heats up. Some think its as soon as this Spring, others this Summer, pretty much everybody has it by EOY. I'll be out of shorting NG by Spring and have already paired my short position by 50%, the easy money has been made. There is a good chance we see 2.50 NG, it might go back and test the 2012 lows of around 2.00. I'll likely be out at 2.50.

    JMHO, consult your financial advisor or Juanton before investing.

  • Reply to

    Rig Count

    by rainbow3100 Jan 30, 2015 5:07 PM
    rainbow3100 rainbow3100 Jan 31, 2015 1:17 AM Flag

    Yes, I read Rigzone as well as multiple other news sources for NG, also do my own research on the Texas RRC website and know my way around the oil patch. - have friends that are CEO's and others employed in the industry. Also know lots of large land/mineral owners in TX, my family amongst them.

    There are a lot of differences between you and I Juanton, chief amongst them is reading and writing. While you can read, you can't write. I'm adept with the pen and it's mightier than your senseless dribble.

    All members of my family write well and a few of us are published authors: our educational levels include Doctors, Lawyers, MBA's, Engineers and a wide variety of other degrees: we believe in education and thoughtful communication.

    Do you believe in thoughtful communication? How about showing some compassion for your fellow posters instead of the constant antagonism? We are all in this together, why not show some respect for others?

  • Reply to

    Rainbow - thoughts on Cheniere Energy?

    by nikonikos1234 Jan 29, 2015 7:39 PM
    rainbow3100 rainbow3100 Feb 2, 2015 10:26 PM Flag

    There is a good book called "The Frackers" by Gregory Zuckerman that tells about the history of Cheniere Energy and its CEO Charif Souki. It also highlights Aubrey McClendon (CHK), Tom Ward (SD), Harold Hamm (CLR), Mark Papa (EOG) as well as George Mitchell of Mitchell Energy. It's a great read!

    Bill Powers has authored a book called "Cold Hungry And In The Dark" which is also a good read but largely pertains to NG. He is off by a few years on his predictions, as he largely ignored the significance of the Marcellus/Utica, but its a good read nonetheless.

    The rig count declines in the Oil Patch will have an impact not only on Oil, but also on the associated NG. I'm still bearish NG short term but think Q4 heading into next year should be very good. The trick is timing it right, the market usually gets things figured out 6 months or so in advance.

    I blew the call saying NG would have a floor of 4, so don't put too much into my long term forecasts, but I did call the reversal of NG prices in late October heading into early November and that was a good call. Also called the double bottom at around 2.20 back in 2012, it did go a bit lower. Then said NG would hit 5, maybe 6 last winter, which it in fact did so. My track record is pretty good, not perfect. I'll be out of my current short position when it hits 2.50, good chance that it heads lower, but I'm not going to get greedy and have already laid off more than 50% of my short position.

    GLTA, don't invest on what somebody says on a MB, consult your financial advisor and most importantly Juanton.

  • Reply to

    where's neiljneil

    by juan_ton_amigo Feb 5, 2015 9:01 AM
    rainbow3100 rainbow3100 Feb 5, 2015 7:37 PM Flag

    It looks like the market thinks NG stocks will be making good money in 6 to 8 months, hence the recent rally. I'm still short via DGAZ and have done well in it. Not as well as UGAZ last winter. Will be totally out of DGAZ soon, most of the money has already been made.

    Never thought I'd be bearish on NG as I'm basically a Long Term Bull on it, but with the incredible build in supply, this was a pretty easy call on figuring out storage levels heading into and thru winter and I stated my views back in late October into November.

    It may still go lower but why get greedy.

    Once winter is over, we should see a lot of Coal Plants retiring. Mexico exports will continue to grow, industry demand steadily increasing, and a little bit of extra demand from transport. Then in Q4 the first LNG exports hit. Supply should taper off or at least not grow by much after Q4. We should see between 500 and 800 rigs having left the Oil Patch by then which will definitely impact the associated gas supply.

    Say what you may, but I've had NG pretty much nailed since 2012.

    It's kind of like that old Carly Simmons Song:

    "Nobody Does It Better"

    Nobody does it better
    Makes me feel sad for the rest
    Nobody does it half as good as you
    Baby, you're the best!

    Eat your heart out Juanton, Carly loves me, I'm simply the best. And lay off my buddy Neil, he's a good guy.

SD
1.78-0.04(-2.20%)Mar 27 4:05 PMEDT