Fwd: Low natural gas prices no boon for shale
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jtr...@epix.net
Jan 20, 2011, 2:05:32 PM1/20/11
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----- Forwarded Message -----
From: "ralph kisberg" <rkis...@hotmail.com>
To: "john trallo" <jtr...@epix.net>,"rda" <responsibledr...@gmail.com>
Sent: Thursday, January 20, 2011 8:53:04 AM
Subject: FW: Low natural gas prices no boon for shale
How are your math skills? Do these people make money or lose money?
Let's assume we're foolish enough to follow the corporate business plan rather than a national sustainable energy policy for a minute.
The question is, why on earth would anyone (such as the owner of leased land) want to sell their 'product' at bargain basement prices, especially at a time when the supply greatly outweighs the demand?
When you consider the loss of property use, the loss of property value, the increase of property tax, then loss of peace and quite indefinitely, the risk of 'accidental' spills and/or methane migration, etc., doing this now would be dumbest economic investment/business decision anyone could possibly make.
Sure, the shareholders will make a killing in the long run when they unload their stock when there's a market increase, but in the end, it's the landowner who takes the hit.
From: kat...@verizon.net
Subject: Low natural gas prices no boon for shale
Date: Thu, 20 Jan 2011 00:51:30 -0500
To:
Low natural gas prices no boon for shale
By Joe Napsha, PITTSBURGH TRIBUNE-REVIEW
Saturday, January 15, 2011
Saturday, January 15, 2011
The drop in natural gas prices this winter could slow down booming development in Pennsylvania's Marcellus shale natural gas reserves, industry experts and observers said.
"They're cutting production to lower costs. There's so much production coming on line overall," said Kent Moors, director of Duquense University's Energy Policy Research Group and an expert on oil and natural gas policy. Among the natural gas exploration companies reducing operations in the state are Chesapeake Energy Corp., Range Resources Inc., Cabot Oil and Gas Corp. and Talisman Energy Inc. Although plans to cut exploration in the state's Marcellus shale reserves have been "marginal so far," Moors said, the change in drilling strategy is in response to a combination of lower prices and higher levels of storage.
Natural-gas futures prices on the New York Mercantile Exchange had fallen to $4.48 per million BTUs for delivery in March, down from $5.69 a year ago, according to the Energy Information Administration. Although natural gas prices have fallen, the cost of drilling a well into Marcellus shale reserves has not fallen. It remains about $4 million for all exploration and production costs.
"There's a surplus of (natural) gas," Moors said. Gas inventories at the end of the last year were just 1 percent below the 2009 end-of-year record-setting level. Those inventories are expected to remain at near record-high levels for most of this year, the agency projected. In addition to high inventories, the agency predicts that at the end of the heating season, inventories will be at a record high and well above the 2010 level.
The long-term impact might be minimal because companies will drill for natural gas in Marcellus reserves because it is shallower — about 5,000 feet deep — than in other areas. The Barnett shale in Texas lies 12,000 feet below the ground, making drilling there more expensive.
Chesapeake Energy announced it is cutting its two-year growth rate to 25 percent, from a previously announced rate of 30 percent to 40 percent. Chesapeake said it will focus on reducing long-term debt by 25 percent over the next two years by substantially cutting its spending on leases and selling assets. Chesapeake spokesmen in Oklahoma City and in Cecil, Washington County, could not be reached for comment.
Range Resources, with offices in Cecil, has cut exploration nationwide, but about "90 percent of the exploration is focused on Pennsylvania because we believe it is one of the best places to drill and lease," said spokesman Matt Pitzarella. Companies might scale back as they adjust to market conditions, Pitzarella said. Natural gas prices are at a 15-year low.
Talisman Energy Inc., which has an office in Cranberry, said it will reduce its Marcellus shale rig count this year to nine from 12. The company said it is shifting its $4 billion budget on exploration and development to oil production, cutting spending on natural gas by 35 percent. Still, Talisman spokesman Mark Sherman, said the company anticipates spending $800 million in natural gas exploration in Pennsylvania to produce 350 million cubic feet to 450 million cubic feet of shale gas this year, up from 315 million cubic feet in 2010.
Cabot Oil and Gas, with offices in Robinson, altered its drilling plans this year because of the cost of the drilling and the drop in natural gas prices, said spokesman George Stark. Cabot plans to drill just 54 wells in the Marcellus this year, instead of its original projections for 85, Stark said. All of Cabot's wells are in Susquehanna County, north of Scranton, where the company has invested $1 billion in the past four years into wells that are producing 250 million cubic feet of gas daily.
Penneco Oil Co. of Delmont has increased its drilling budget by 50 percent for 2011, but it is focusing on oil production because of the high production costs in Pennsylvania and the low natural gas prices, said Ben Wallace, chief operating officer. Sixty percent of its drilling budget will be spent oil wells outside of Pennsylvania — Wyoming, North Dakota, Utah and Texas.
Natural gas production in the Marcellus shale is being affected by an influx of foreign money from China, India and France, said Ellen Beswick, editor of trade publication NGI Shale Daily. "They want to learn the technology so they can take it home. The lower prices have not caught up with those people," Beswick said. The larger exploration companies that have the financial backing are continuing to drill and produce natural gas, even as the prices drop and make it unprofitable to operate the rigs. With the foreign money in play, "it's a feeding frenzy," Wallace said.
"They're cutting production to lower costs. There's so much production coming on line overall," said Kent Moors, director of Duquense University's Energy Policy Research Group and an expert on oil and natural gas policy. Among the natural gas exploration companies reducing operations in the state are Chesapeake Energy Corp., Range Resources Inc., Cabot Oil and Gas Corp. and Talisman Energy Inc. Although plans to cut exploration in the state's Marcellus shale reserves have been "marginal so far," Moors said, the change in drilling strategy is in response to a combination of lower prices and higher levels of storage.
Natural-gas futures prices on the New York Mercantile Exchange had fallen to $4.48 per million BTUs for delivery in March, down from $5.69 a year ago, according to the Energy Information Administration. Although natural gas prices have fallen, the cost of drilling a well into Marcellus shale reserves has not fallen. It remains about $4 million for all exploration and production costs.
"There's a surplus of (natural) gas," Moors said. Gas inventories at the end of the last year were just 1 percent below the 2009 end-of-year record-setting level. Those inventories are expected to remain at near record-high levels for most of this year, the agency projected. In addition to high inventories, the agency predicts that at the end of the heating season, inventories will be at a record high and well above the 2010 level.
The long-term impact might be minimal because companies will drill for natural gas in Marcellus reserves because it is shallower — about 5,000 feet deep — than in other areas. The Barnett shale in Texas lies 12,000 feet below the ground, making drilling there more expensive.
Chesapeake Energy announced it is cutting its two-year growth rate to 25 percent, from a previously announced rate of 30 percent to 40 percent. Chesapeake said it will focus on reducing long-term debt by 25 percent over the next two years by substantially cutting its spending on leases and selling assets. Chesapeake spokesmen in Oklahoma City and in Cecil, Washington County, could not be reached for comment.
Range Resources, with offices in Cecil, has cut exploration nationwide, but about "90 percent of the exploration is focused on Pennsylvania because we believe it is one of the best places to drill and lease," said spokesman Matt Pitzarella. Companies might scale back as they adjust to market conditions, Pitzarella said. Natural gas prices are at a 15-year low.
Talisman Energy Inc., which has an office in Cranberry, said it will reduce its Marcellus shale rig count this year to nine from 12. The company said it is shifting its $4 billion budget on exploration and development to oil production, cutting spending on natural gas by 35 percent. Still, Talisman spokesman Mark Sherman, said the company anticipates spending $800 million in natural gas exploration in Pennsylvania to produce 350 million cubic feet to 450 million cubic feet of shale gas this year, up from 315 million cubic feet in 2010.
Cabot Oil and Gas, with offices in Robinson, altered its drilling plans this year because of the cost of the drilling and the drop in natural gas prices, said spokesman George Stark. Cabot plans to drill just 54 wells in the Marcellus this year, instead of its original projections for 85, Stark said. All of Cabot's wells are in Susquehanna County, north of Scranton, where the company has invested $1 billion in the past four years into wells that are producing 250 million cubic feet of gas daily.
Penneco Oil Co. of Delmont has increased its drilling budget by 50 percent for 2011, but it is focusing on oil production because of the high production costs in Pennsylvania and the low natural gas prices, said Ben Wallace, chief operating officer. Sixty percent of its drilling budget will be spent oil wells outside of Pennsylvania — Wyoming, North Dakota, Utah and Texas.
Natural gas production in the Marcellus shale is being affected by an influx of foreign money from China, India and France, said Ellen Beswick, editor of trade publication NGI Shale Daily. "They want to learn the technology so they can take it home. The lower prices have not caught up with those people," Beswick said. The larger exploration companies that have the financial backing are continuing to drill and produce natural gas, even as the prices drop and make it unprofitable to operate the rigs. With the foreign money in play, "it's a feeding frenzy," Wallace said.
To read this article online, click here:
http://www.pittsburghlive.com/x/pittsburghtrib/business/s_718314.html
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