Despite four blizzards in the Northeast and snow covering the Southeast, the NG storage withdrawal numbers seem to indicate that production may actually be in excess of what the EIA predicted.
From a Feb 5th Bloomberg article:
Output will rise 3.2 percent in 2015, led by gains at the Marcellus formation, the nation’s biggest shale deposit, according to the Energy Information Administration. Marcellus production will increase 2.8 percent through February after a 21 percent gain in 2014, a year when prices tumbled 32 percent. Producers in Pennsylvania and West Virginia have cut break-even costs by half since 2008, according to Oppenheimer & Co.
Hi, Cuda. Bloomberg had an article approximately 3 weeks ago that projected an increase in NG production for 2015 of 3.1%, despite the idling of many rigs. I'm not certain, but I believe the source was the Dept of Energy.
The projections are that NG production for 2015 will be significantly higher than 2014 despite the crash in prices. The saving grace will be LNG exports which are supposed to begin in the fourth quarter of this year but really won't ramp up for many months thereafter as more liquefaction/export terminals come on line. My guess is that you're looking at sub-$3 NG for most of 2015.
One of Bloomberg's analysts reported today that a consequence of slumping prices in the oil and NG industry is that petroleum companies now have more leverage and pricing power with the oil services industry. They can go to these people and say "if you want my business, cut my drilling costs by 20%." The fallout is that marginal producers, rather than go bankrupt, can continue to make a profit and continue to produce at lower and lower prices.
Analyst Gary Shilling reported that "of the 2222 oil fields surveyed worldwide, only 1.6% would have negative cash flow at $40 a barrel. That suggests there won't be a lot of chickening out at $40 a barrel... Sure, the drilling rig count is falling, but it's the inefficient rigs that are being idled, not the horizontal rigs that are the backbone of the fracking industry."
Energy, in case you haven't noticed, many of the folks who read this board have rose-colored glasses stapled to their skulls. You think you're doing them a favor by sharing balanced, objective, factual information to help them make reasoned decisions regarding their investment? You'd be wrong. Anything that doesn't fit their Rah! Rah! #$%$! #$%$! version of this stock gets a thumbs down from these mentally-challenged pinheads.
You know what they say about a fool and his money...
However, most of us do appreciate the worth of insightful input, both positive and negative, on this BB. Thanks.
Get Ready for $10 Oil
comments icon396time iconFeb 16, 2015 6:00 PM EST
By A. Gary Shilling
(Very interesting and well-summarized report on Bloomberg last night).
Also read another article that reported rumors of tankers being filled with sub-$50 oil out on the seas cruising in circles in hopes of a near-term price rise, at which time said oil would be delivered. Reported storage facilities were filling up and soon there would be no more room for crude to be stored at any price. Not sure what the storage capacity is for natural gas, what the chances are of filling same, or how a further crunch in the price of crude would affect NG.
HT, a scenario here. If I'm CEO of Petroleum Company X and looking to expand, why would I pay a premium price for MHR, when I could just wait a few months and buy the assets of another company for pennies on the dollar when said company goes bankrupt? I suspect in the current climate, more than a few oil and gas companies will go belly up. Alternatively, if I'm really hot for MHR, take the chance that oil and gas prices won't rebound quickly and wait a year and a half or two when MHR is desperate for cash, then give them a lowball offer? Pardon me for being cynical here, but I'm one of those people who believed GE several years ago when he said the company would be sold in 12-24 months, back when he actually could have gotten a premium price for it. Instead, he chose to go on a buying spree and plunge the company further in debt.
Actually, ht, I appreciate your posts, and I wish you would withdraw this wager, for I fear that it is one you are going to lose.
Despite the spike in crude, the DOE said a couple of days ago that the oil glut is increasing, and, you will notice, NG did not participate in the spike and continues to drop despite a third blizzard underway in the Northeast. I believe we have many months before petroleum prices recover, and I'm afraid you will have several more opportunities to buy MHR below $2/share. This is coming from one who tends to be a long-term investor and who is long this stock. This has undoubtedly been one of my worst investments ever. Bottom line is that for the next 1 1/2 to 2 years, like the last 4, the only people making money on MHR are GE and his cronies, and the swing traders.
Can't recall where I saw that. Did see an article in USA Today from April of last year that said 31 NG liquefication/export facilities had applied for approval and 6 of those had already been conditionally approved. Said that when all came on line, they could potentially export 36 BCF/day, and that current US production and consumption was 70 BCF/day. In a Fortune mag article from last year, Cheniere (who begins exporting NG from their Sabine Pass LNG plant late this year) reported that between their LA and TX facilities, they alone will buy and export 6% of all US NG production by 2020.
With NG @ 2.5-3, year one the credit line takes a serious hit even with decreased capital expenditures. Sometime in year two the credit line is exhausted (depending on the amount of cash generated by this time by the joint ventures), and the pipeline gets sold off in chunks (assuming it wasn't spun off in year one). By the end of year three, if NG stays this low, we reach the end of the line.
However, NG won't stay this low beyond 18-24 months IMO. In 2015 quarter 4, exports of LNG begin. By the end of 2018, LNG exports will be at 50% of current NG production, and many more coal-fired power plants will have converted to cheap, less-polluting NG.
Now all of this is just speculation from an outsider looking in. If you want an opinion from someone who actually knows the business, I'd say ask Cuda.
btw, a recent Bloomburg article predicted that, even with all the halt in drilling, the NG supply will increase 3.1% in 2015 with all the new production coming on line. And we are in the midst of the coldest part of winter with two blizzards in the past 2 weeks, and the price of NG hasn't budged a bit. Somewhat discouraging.
Bottom line is I think that MHR survives and you make a lot of money if you are holding at these prices. But give it 2 years. And this is a very speculative investment.
I guess our friends at Yahoo think that "keep on" is an expletive, because they bleeped it out. The folks at Yahoo are just absolute computer wiz-kids.
Upton, everyone knows that Obama has run the national debt up to over 18 trillion dollars, but what most aren't aware of is that the U.S. government has a staggering 247 trillion in unfunded liabilities, the majority of which is Social Security and Medicare. SS and M receipients have to depend on current taxpayers to fund these Ponzi schemes because our elected friends in Congress have spent all of the money in the "trust funds" for these programs. The trust funds are full of nothing but I.O.U.'s from the government. On top of that, the base of taxpayers to fund these programs has been steadily shrinking as the elderly population getting the money has been growing. It's all a house of cards. The numbers just don't and absolutely cannot work.
Meanwhile, Obama goes on busting the 10 year budget deal he agreed to a few years ago, wanting to run the deficit up even further. I guess he believes the Fed can #$%$ printing funny money to fund his programs forever with no consequences. And telling a bold-faced lie to the American public has never troubled him at all.
The irony of it all is that Obama's supporters, the ones who voted for him, will be hurt the most by his ignorance and stupidity when the house of cards collapses (and it will collapse, because those in Congress, both Democrat and Republican, don't have the balls to make the extremely tough choices now that are necessary to keep SS and M afloat).
I agree with you that the Keystone will not be built anytime soon, not necessarily because of an Obama veto, but because no one will be interested in building something to transport expensive tar sands oil with oil currently at $50/bbl, and probably stuck there for the next 2 years.
Ain't nobody building no Keystone carrying expensive-to-produce tar sands oil with crude at $44/bbl. Agree with Upton.
Makes sense to me, Blackjack. FWIW, Obama doesn't have the vision to pursue something like the buildout of our natural gas infrastructure. It would only mean that we could fuel our private vehicles for the next 100 years for less than half what we do now, and we could say goodbye to all foreign oil imports for the foreseeable future. He's too busy reaching into your pocket taking your hard-earned cash to fund another government giveaway program. What was it this week, free college? Thank God we aren't 18 trillion in debt. Wait... I guess we are!!! See, the Democrat party survives only if it can keep a large segment of the population dependent on government handouts. That's their voter base. That's how they keep them enslaved. That was the purpose of Lyndon Johnson's Great Society legislation. Made it unnecessary to have a father in the home to raise a family. That guaranteed generations of single-parent households dependent on the government. Brilliant, no? To the "progressives," rugged individualism, independent effort, personal responsibility, and the constitution are all dirty words.
That's good old American free-market capitalism at work, and I tend to agree with you. Think this process takes 18-24 months to play out.