Friday, September 28, 2012

Spoiler Alert!

I read an interesting piece about the movie "Promised Land" (and here) that offered a plot spoiler.  I won't link to the article because I find the author to be something of an ass (Google it if you are interested). Instead, I'll offer the disclaimer that this spoiler is hearsay and technically a rumor.

Anyway, the trailer of "Promised Land" makes the viewer think that Matt Damon is the misguided bad guy who eventually turns on his evil employer after falling for the gal and small town life.  I like to play a parlor game whenever I see a movie trailer to guess what they are trying to tell us and what the truth behind the plot is.

In the case of "Promised Land," the dramatic twist apparently is that the anti-hero (played by co-writer John Krasinski, of "The Office" fame), the environmental conscious for the story, is actually a double agent planted by the evil gas company to discredit the environmental movement.  So instead of the gas company just being bad, they are actually badderer (remember those "thickerer" Chunky bars?).

After much of the hyperbole and discredited stances, from Josh Fox to Dimock, PA, the anti-fracking movement is desperately searching for a factual toehold in reality.  Unfortunately, they have to rely on this fiction.  I don't know if this spoiler is true, but it certainly makes sense given the trailer.  As I'm sure some clever chap on the internet has already said, "well played, Hollywood, well played."

Gas from Oil Wells

Yesterday I posted a picture of the natural gas flow from the EIA Annual Energy Review, a very informative, although slightly anthropomorphic, graphic showing where gas comes from and where it goes.  What I forgot to point out was that 27.7% of the gross gas withdrawals in 2011 came from oil wells.  That's 6.2 Tcf of a total withdrawal of 28.56 Tcf.  In 2010, gas from oil wells was 5.78 Tcf, or 21.5%.  In 2009, it was 5.19 Tcf, or 19.8%.

One of the wildcard factors that makes projecting future production more difficult is estimating how much "associated" gas will be produced.  I first looked at that stat and felt a sense of relief.  With the growth in oil rigs versus gas rigs over the past couple of years I thought it would be worse.

Until...I looked at the rig counts.  In 2011, the total rig count increased by 313.  There were 428 new oil rigs (765 to 1,193) and 110 fewer gas rigs (919 to 809).  Hmmm.  Fast forward to today, and the total rig count has dropped by 159 rigs, but oil rigs have increased by 217 (1,193 to 1,410) and gas rigs have decreased by 374 (809 to 435).

That's a big difference from 2011.  It all depends on where the oil rigs are drilling (i.e. are they flaring gas instead of taking it to market, etc.), but I would expect the percentage of gas from oil rigs to continue to increase in 2012.  That's not good for dry gas plays like the Haynesville Shale.  Because gas from oil wells is pretty much a byproduct and its production is unrelated to price, there is an increasingly large block of natural gas production that will not respond to price fluctuation and will continue to be produced (unless oil prices drop).  The net impact is that producers will continue to avoid drilling in dry gas plays like the Haynesville.

Electricity Market Share Back in Favor of Coal

Remember a couple of months ago when it made big news that coal and natural gas had tied in terms of market share of fuels for power generation.  In April 2012, both coal and gas fueled 34.2% of the power generated in the U.S.  Since then, coal has moved back in front with a 36.4% market share.  The June numbers show natural gas in second place at 32.1%, while all other sources (hydro, solar, wind, geothermal, etc.) cumulatively represent 31.5%.

U.S. Rig Count: -11 to 1,848

The Baker Hughes rig count was down 11 this week to 1,848.  Oil rigs were up eight to 1,410, gas rigs were down 19 to 435 and miscellaneous rigs were unchanged at three.  The gas rig count has not been this low since June 11, 1999, more than 13 years ago.

By type, horizontal rigs were down seven to 1,142, vertical rigs were up six to 514 and directional rigs were down ten to 192.  Among gas rigs, horizontal rigs decreased by 17 to 306, directional rigs decreased by four to 75 and vertical rigs increased by two to 54.

To add a little context, total rigs recently peaked in the first week of November 2011 at 2,026 (the green hump on the right in the above chart).  Since then, the rig count has dropped by 9%, or 178 rigs.  But during this roughly eleven month period, the number of oil rigs has increased by 298, while the number of gas rigs has decreased by 472, a drop of 52%.

UAE and Promised Land?

The other day I mentioned the new Hollywood feature called Promised Land, which promises to bash hydraulic fracturing and the natural gas industry.  I read this morning that one of the groups financing the movie is Abu Dhabi Media Company, wholly owned by the Abu Dhabi government.  Abu Dhabi, as you know, is the largest of the United Arab Emirates, and is its capital.

Isn't that a hoot?!?  Here we have an OPEC member state funding a movie attacking natural gas production in the United States.

The export of natural gas is especially important to the UAE, and the introduction of less expensive North American gas will not help the country's "top line."  While there are certainly more than enough potential gas consuming customers out there, if the U.S. starts exporting LNG, current exporting nations are going to have to compete in a marketplace with cheaper U.S. gas.  I'm no economist, but when a less expensive comparable product enters the market, prices tend to go down.

Seems like motive to me.

Thursday, September 27, 2012

2011 Natural Gas Flow

One of my favorite images in each year's EIA Annual Energy Review is the Natural Gas Flow.  In a single image you can see where gas comes from and where it goes.  A simple but powerful tool to understand the natural gas market in the U.S.

Or maybe I just like it because it looks like Sigmund the Sea Monster and it reminds me of my childhood.

Shale Gas Boom

The EIA was full of good graphics today.  The table below, sourced from Lippman Consulting, shows shale gas production from January 2010 to June 2012.  Pretty amazing that you see production grow from around 12 Bcf/day to 25 Bcf/day in a price environment that can charitably be called "challenging."  Just think if natural gas were trading at $8/MMBtu and we weren't totally oversupplied...

One thing the chart also shows is the leveling off of Haynesville production.  This has been a topic of conversation around here and will have to wait for another day in this forum, but it will be interesting to see what happens Haynesville production over the next six months or so as the impact of the plummeting rig count is felt.

Four New Texas Permits

9/11/12 - 9/26/12:

Hmmm, only four new Haynesville permits in two weeks?
  • Rhodes (directional) #7, Valence Operating; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: ROBERTS, H, A-562 
  • Minutemen DU #1H, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: BOUNDS, TW, A-1186 

New Texas Completions

9/10/12 - 9/26/12:
  • Moonshine Fee Mineral #4H, Chevron USA: 9.347 MMcf/day IP, 12/64" choke, 8,915 psi; Perfs: 14,470-19,200, length: 4,730 ft.; Carthage Field (Haynesville Shale), Nacogdoches Co., Survey: CHIRINO, J A, A-17 
  • East Ingram GU SBN #1H, Chesapeake Operating: 14.904 MMcf/day IP, 222/64" choke, 7,106 psi; Perfs: 12,900-17,823, length: 4,923 ft.; Carthage Field (Haynesville Shale), Sabine Co., Survey: HORTON, J, A-114 
  • Pool Unit #1H, EOG Resources: 11.972 MMcf/day IP, 17/64" choke, 9,416 psi; Perfs: 14,400-20,216, length: 5,816 ft.; Carthage Field (Haynesville Shale), San Augustine Co., Survey: MOSS, J , A-189

Storage Injections This Season

As noted earlier, the weekly EIA working gas in storage report showed an 80 Bcf net injection, which was the highest injection so far this season (starting in March 2012).  That's pretty amazing and has helped narrow the gap between the current storage level and the five year average significantly.  At one point this spring, the level of gas in storage was 60% higher than the five year average (below).

Thankfully, unusually low injection levels this season have helped rein in the storage disparity.  Today, the EIA published the chart below which captures the concept in a picture, showing how far this year's injection levels have been below last year and the five year average.  To me it shows pretty good restraint from producers given the amount of shale gas out there ready to go.

GE Sees Boost in Gas in Baseline Power Generation

The Financial Times reports that the head of GE's power and water division says the company is seeing increased investment worldwide in power plants that use natural gas to provide baseload electricity (may require registration).  Gas normally is used for peaking needs because gas turbines are easier to start and stop while baseload needs are usually carried by coal, nuclear or oil.

GE is touting new orders in Japan, Saudi Arabia and the U.S.  In all of those cases, there are good reasons:  Japan is shifting away from nuclear after the recent earthquake and tsunami, Saudi Arabia would rather export its oil for $100+/barrel than burn it for electricity and the U.S. has an abundance of cheap gas and will see new pollution restrictions on coal-fired power plants in the next decade.

The real trick will to see this trend hit China and India, which are both building coal plants faster than we can count.  This, unfortunately, is unlikely until both countries obtain a reliable pipeline (no pun intended) of natural gas to support such investment.  China has large shale gas deposits and is in the beginning stages of exploring and developing them.  It is also working on big conventional offshore projects.  Indian companies are dipping a toe in shale gas, through some "educational investment" and LNG deals, but they likely will trail China.

Generally, I think using natural gas as a baseline fuel is a trend that will continue in coming decades as new gas sources are tapped worldwide (they are out there, for sure).  GE certainly sees this as a trend:  FT notes that GE invested $11 billion in gas-related acquisitions in 2010-11.

EIA: Storage +80 Bcf to 3.576 Tcf

The EIA working gas in storage report showed an 80 Bcf increase, bringing the total working gas in storage to 3.576 Tcf.  The weekly injection was 23% lower than last year (+104 Bcf) but 5% higher than the five year average (+76 Bcf).  The current storage level is now 9.0% above last year and 8.6% above the five year average.

Temperatures last week averaged 66.0 degrees, 2.0 degrees warmer than last year and 0.9 degrees cooler than average.

Wednesday, September 26, 2012

New Louisiana Completions

  • Graves 13-16-16 H #1, Chesapeake Operating: 1.608 MMcf/day IP on 14/64 in. choke at 1,830 CP psi; Perfs: 11,532-15,994, length: 4,462 ft.; Greenwood-Waskom Field, Caddo Parish, S13/T16/R16; res. A, serial #240450 
  • Tolson 1 H #1, Petrohawk Operating: 6.115 MMcf/day IP on 14/64 in. choke at 6,124 psi; Perfs: 12,135-16,705, length: 4,570 ft.; Bethany Longstreet Field, DeSoto Parish, S12/T13/R16; res. A, serial #241730 

Monday, September 24, 2012

Are You Ready for Promised Land?

If you thought the reaction from Gasland was bad, now comes a major Hollywood release called "Promised Land" starring Matt Damon fictionalizing the impact of the boom of the Marcellus Shale in one particular rural community.  Here is the trailer.

I don't go see movies any more since I have two small kids and it's a hell of a lot cheaper to fall asleep at home than in a movie theater, but I think I know exactly how this movie will play out without seeing it.  I think we all do.  It looks like a strong dose of hyperbole will be thrown in to make the leading man go from a heartless landman to a community advocate out to save the land and a way of life from his $9 billion corporation.

It may be no accident that Matt Damon is starring in a film on this subject (he also co-wrote it).  He is deeply involved with, which has the laudable goal of bringing fresh water to deeply impoverished populations in third world countries.  But I'm sure any threat to water in the United States, real or imagined, is on his mind as well.  More than once in the trailer there is footage of him drinking directly from an outside water well.  Hopefully he won't pull out a lighter, but I'm sure someone in the film will.

Unfortunately, people likely will react more to a Matt Damon movie than a fact-challenged documentary produced by a Brooklyn hipster, although I doubt the audiences will overlap that much.  I doubt you will see any change from the people who already are mobilized against hydraulic fracturing, but for some people this might be the first time they've even heard of it.  Not that this is a battle that will be won in the court of public opinion, but I hope people are able to separate the fiction from, well, the fiction.  If nothing else, maybe the'll forget it all when they get home with an episode of "Jersey Shore," another show ostensibly about water.

Sunday, September 23, 2012

Haynesville Shale Rig Count: -1 to 20

The Haynesville Shale rig count dropped by another rig this week to 20.  Louisiana was unchanged at 12 while Texas was down one to eight.  

Friday, September 21, 2012

U.S. Rig Count: -5 to 1,859

The Baker Hughes U.S. rig count dropped by five this week to 1,859.  Oil rigs were down 11 to 1,402, gas rigs were up six to 454 and miscellaneous rigs were unchanged at 3.  By type, horizontal rigs were up 16 to 1,149, vertical rigs were down 16 to 508 and directional rigs were down five to 202.  Among gas rigs, horizontal rigs were up seven to 323, directional rigs were unchanged at 79 and vertical rigs were down one to 52.

13 New Louisiana Completions

  • Brushy Group 33 #1, Encana Corp.: 13 MMcf/day IP on 21/64 in. choke at 7,069 psi; Perfs: 12,930-17,431, length: 4,501 ft.; Oxford Field, DeSoto Parish, S33/T11/R12; res. Jur-A, serial #244032 
  • Smith 3-16-13 H #1, Chesapeake Operating: 15.144 MMcf/day IP on 22/64 in. choke at 6,254 psi; Perfs: 11,340-15,714, length: 4,374 ft.; Cedar Grove Field, Caddo Parish, S3/T16/R13; res. A, serial #243944 
  • Douglas 25 H #1-ALT, XTO Energy: 8.401 MMcf/day IP on 14/64 in. choke at 6,538 psi; Perfs: 11,930-16,537, length: 4,607 ft.; Bethany Longstreet Field, DeSoto Parish, S25/T13/R15; res. A, serial #244060 

Thursday, September 20, 2012

EIA: Storage +67 Bcf to 3.496 Tcf

The EIA working gas in storage report showed a 67 Bcf net injection this week, bringing the total gas in storage to 3.496 Tcf.  The weekly injection was 25% below last year (+89 Bcf) and 8% below the five year average (+73 Bcf).  The current storage level is now 10.1% above last year (3.176 Tcf) and 8.6% above the five year average.

Ah, fall (almost fall, at least):  temperatures last week averaged 69.4 degrees in the Lower 48, 0.9 degrees cooler than last year and 0.3 degrees warmer than average.  Expect a relatively brief period of rapid storage buildup while cooling needs have subsided and before heating kicks in.

Tuesday, September 18, 2012

LNG Export Decision Delayed

The Energy Department said today that the report it commissioned to study the export of U.S. natural gas will not be ready until the end of 2012, which will put off any decision on the dozen or so pending LNG export applications until the new year.  The report is being prepared by a third party consultant and was expected to be done this summer.

Likely the only one happy about this development is Cheniere Energy, which is the only company approved by the government to build an LNG export facility.  They now will have an even wider head start on everyone else.

Monday, September 17, 2012

Haynesville Shale Rig Count: -2 to 21

The Haynesville Shale rig count dropped by two last week to end at 21.  Louisiana was unchanged at 12, while Texas lost two rigs to end at nine, the first time this figure has been in single digits since 2008 (before I was counting).

Friday, September 14, 2012

Counting Louisiana Completions

I posted my weekly batch of Louisiana completions earlier today and I thought it might be time to step back and look at the big picture.  As everyone knows, the Haynesville Shale rig count is a small fraction of what it was back in the summer of 2010 (today its about 14% of what it was then).  Completions lag behind rig counts and they are not directly correlated since the completion work done by a separate crew, but they certainly are related.

The chart below provides a monthly count of Louisiana rigs (averaged) and completions (totaled).  (Because of holes in the data, I don't collect completion dates for Texas.)  The most current three months are shaded lighter to indicate that the data is incomplete for those months because completions are still coming in.

Recent Louisiana Completions

  • Wheless Et Al. 5 #8-ALT, EXCO Operating: 11.51 MMcf/day IP on 18/64 in. choke at 8,227 psi; Perfs: 12,035-16,068, length: 4,033 ft.; Caspiana Field, DeSoto Parish, S5/T14/R12; res. A, serial #243976 
  • Wheless Et Al. 5 #9-ALT, EXCO Operating: 10.252 MMcf/day IP on 16/64 in. choke at 7,751 psi; Perfs: 12,149-16,258, length: 4,109 ft.; Caspiana Field, DeSoto Parish, S5/T14/R12; res. A, serial #243977 

U.S. Rig Count: Unchanged at 1,864

The Baker Hughes U.S. rig count was unchanged this week at 1,864.  Oil rigs were up four to 1,413, gas rigs were down four to 448 and miscellaneous rigs were unchanged at three.  By type, horizontal rigs were down two to 1,133, vertical rigs were up nine to 524 and directional rigs were down seven to 207.  Among gas rigs, horizontal rigs were unchanged at 316, directional rigs were down one to 79 and vertical rigs were down three to 53.

As an aside, I thought it would be interesting to see how the distribution of gas rigs by type would have changed over the past year and a half as the gas rig count dropped 51%, from 911 (February 4, 2011) to 448 (September 14, 2012).  Interestingly, it is almost exactly the same distribution today as it was back then, as shown on the table below.  Nothing incredibly revealing here, but it's not quite what I would have suspected, even though I didn't have a theory going in.

Thursday, September 13, 2012

Away From the Cliff

As a reader pointed out to me a couple of months ago, one of the biggest business stories of the year (at least in the energy industry) has got to be the recovery of natural gas storage levels.  In April 2012, the level of gas in storage was 60.5% higher than the five year average.  Today's EIA working gas in storage report put that figure at 9.0%, which is a pretty amazing recovery in a period of five months.  It is particularly remarkable given the abundance of shale gas and the relative ease in bringing in big, big wells in relatively short order. 

Don't understate the self-control exhibited by producers to lay down drilling rigs and limit production.  Will this lead to higher prices?  Maybe a little bit, but until you see fundamental demand pick up in the U.S. I think you will see a lot of downward pressure around the point where big shale fields become financially viable.  But it's still good news for natural gas.

EIA: Storage +27 Bcf to 3.429 Tcf

The EIA working gas in storage report was up 27 Bcf this week to 3.429 Tcf. The weekly injection was 66% lower than last year (+80 Bcf) and 63% lower than the five year average (+72 Bcf). The current storage level is now 11.1% above last year and 9.0% above the five year average.  This week marks the first time the spread above the five year average storage level has been in single digit percentage points since December 8, 2011.

Wednesday, September 12, 2012

More Coal Plants Idling

The Wall Street Journal had a good article today about the number of coal plants being idled because of low natural gas prices.  This is hardly a new story, but one of the interesting points the article makes is that in many cases where utilities have been bemoaning the EPA's recent pollution regulations targeting coal plants it is fact it is market forces, not the heavy hand of government, that is killing these plants.  A 40 to 50 year old coal plant just can't compete against newer, more efficient gas turbines that are using cheaper fuel.

Chesapeake Sells Most Permian and Midstream Assets

Chesapeake Energy announced today that it has reached agreements to sell most of its holdings in the Permian Basin, representing around one million net acres, to three buyers in separate transactions.  Chesapeake will retain around 470,000 net acres of undeveloped leasehold in the Midland Basin area to either develop in the future or sell (I wonder which it will be...).  The announced price for these transactions is around $3.3 billion, which is less than the $6 billion figure that had been tossed around earlier in the year.

The southern Delaware Basin assets will be sold to SWEPI, LP (Shell), the northern Delaware Basin assets will go to Chevron, USA and the Midland Basin assets will go to EnerVest, Ltd.   The company also noted four other transactions for "non-core" assets in the Utica Shale, but it retains the vast majority of its acreage there.

Chesapeake also announced multiple deals to sell almost all of its remaining midstream assets with another smaller deal for the rest expected to come soon.  With that, Chesapeake's formerly vaunted vertical integration business model will be kaput.

File under, "You've Got To Do What You've Got To Do."

U.S. Storage Adds 136 Bcf of NatGas Storage Capacity in 2012

The EIA announced today that the U.S. added 137 Bcf of net natural gas storage capacity in the Lower 48 between April 2011 and April 2012, when it conducts its annual survey.  This brings the demonstrated peak capacity of the national system to 4.239 Tcf.  The "demonstrated peak" capacity (shaded on table below) represents the highest observed levels in each storage location and is viewed as more dependable than the "design capacity," which more of a theoretical measure based on how each facility is built.  The demonstrated peak is the "hang your hat on" number.

The biggest addition by percentage occurred in the West Region, with an the addition of 46 Bcf, which represents an 8.2% increase, while the biggest addition in terms of actual capacity occurred in the Producing Region with a 77 Bcf gain (+5.7%).

As we chug towards the end of the storage season, including tomorrow's report I estimate that we have about ten weeks left of reporting injections (the average reporting peak date for the past four years is around Nov. 15) and we are 837 Bcf below the demonstrated peak capacity.  Because of logistics (storage location vs. production location, etc.), you can't assume we can neatly pack in 837 Bcf of gas into storage over that time, but it gives us a general understanding of remaining capacity, offering some assurance that we do have some storage headroom going into the stretch run.

Tuesday, September 11, 2012

New Texas Permits

8/20/12 - 9/10/2012:

  • Black Knights (SL) DU #3H, XTO Energy; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: DOUTHIE, A, A-106 
  • Black Knights (SL) DU #4H, XTO Energy; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: DOUTHIE, A, A-106 

Only One New Texas Completion in Three Weeks

8/20/12 - 9/10/12:

  • Womack #9H, XTO Energy: 8.912 MMcf/day IP, 15/64" choke, 6,043 psi; Perfs: 10,722-16,916, length: 6,194 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: KNOLL, P , A-375

Monday, September 10, 2012

New Louisiana Completions

  • Nabors 7 #7-ALT, EXCO Operating: 12.949 MMcf/day IP on 16/64 in. choke at 7,858 psi; Perfs: 12,249-16,383, length: 4,134 ft.; Caspiana Field, DeSoto Parish, S7/T14/R12; res. A, serial #243841 
  • Haynes 32 #2-ALT, EXCO Operating: 16.898 MMcf/day IP on 24/64 in. choke at 7,586 psi; Perfs: 12,301-16,391, length: 4,090 ft.; Holly Field, DeSoto Parish, S32/T14/R13; res. A, serial #242773 
  • Olympia Min 10 H #1, Encana Corp.: 20.361 MMcf/day IP on 25/64 in. choke at 7,626 psi; Perfs: 12,900-17,455, length: 4,555 ft.; Bayou San Miguel Field, Sabine Parish, S3/T8/R12; res. A, serial #244057

Saturday, September 8, 2012

Haynesville Shale Rig Count: -1 to 23

The Haynesville Shale rig count dropped by one this week to 23.  The count was unchanged in Louisiana at 12 and down one in Texas to 11.

Chesapeake to Sell Fort Worth Office Tower

Five years ago, Chesapeake Energy bought a 20 story office tower in Fort Worth, then the epicenter of shale drilling, for $104 million, which represented 60% more than its appraised value.  (Overpaying - does that sound familiar?)  Today, with shale gas drilling as popular as the flu, Chesapeake is looking to sell what is now known as Chesapeake Plaza.

The current assessed value is $62.7 million (just a few million dollars below the appraised value five years ago), but in the current commercial property market, who knows what it might go for.  Chesapeake needs the cash to fund its drilling program, but it has already felt the financial pain, having booked a $219 million loss for this asset last quarter.  These days, Chesapeake is only running two rigs in the Barnett Shale and two in the Haynesville, so holding onto expensive real estate in the region just doesn't make sense.

Friday, September 7, 2012

U.S. Rig Count: -30 to 1,864

The Baker Hughes U.S. rig count was down 30 rigs this week to 1,864.  Oil rigs were down 10 to 1,409, gas rigs were down 21 to 452 and miscellaneous rigs were up one to three.  The gas rig count hasn't been this low since July 1999.  By type, horizontal rigs were down 14 to 1,135, vertical rigs were down 11 to 515 and directional rigs were down five to 214.

Among gas rigs, horizontal rigs were down nine to 316, directional rigs were down eight to 80 and vertical rigs were down four to 56.

Thursday, September 6, 2012

Now That's a Good Looking Coal Mine

I like this coal mine for two reasons: 1) it has become a monumental public art project and 2) it is no longer a working coal mine.

The installation pictured above is a large installation built atop a closed coal mine in northern England.  Titled Northumberlandia, this large female nude was fashioned from rock, earth and waste from the shuttered coal mine.  It was privately funded by a land owner and the company that built the mine and is without a doubt the best looking coal mine I've ever seen.

Unfortunately, I doubt there are many public art works carved out of the remains of West Virginia mountaintops when the strip mining is done.  The local residents will be lucky enough to have a functioning ecosystem and a reforested nub where a peak once stood.  At least the owners of this Wyoming coal mine converted the reclamation site to a wind farm.  That's progress up the environmental ladder.

EIA: Storage +28 Bcf to 3.402 Tcf

The EIA working gas in storage report showed a 28 Bcf net increase, bringing the total gas in storage to 3.402 Tcf.  The weekly injection was 55% below last year (+62 Bcf) and 53% below the five year average (+60 Bcf).  The current storage level is 13.1% above last year (3.007 Tcf) and 10.7% above the five year average (3.073 Tcf).

Temperatures last week averaged 74.9 degrees, 0.1 degrees cooler than last year and 2.7 degrees warmer than average.

Gas Fuels More Growth

While the biggest immediate market for natural gas is to gain market share from coal in power production (see Dominion's announcement that it will convert its aging Bremo coal-fired power station to natural gas), new industrial uses are popping up all around.  Yesterday came the announcement from Egyptian company Orascom Construction Industries that it will build a $1.4 billion fertilizer plant in Iowa that will use natural gas.  The plant should be completed in 2015.

This follows previous announcements from Dow and Shell that they are building large scale manufacturing plants in Texas and Pennsylvania, respectively, based on natural gas.  While much is made of the low price of gas, I think a more important factor is the increased, predictable supply of natural gas that has decreased price volatility of the commodity and will allow companies to plan and hedge costs well into the future without the wild swings seen in the past.

I Don't Need to See This First Thing in the Morning

The black license plate on the black car looks cool, but I don't really care for the message, "Coal Keeps the Lights On."  I would much prefer, "Coal Pollutes the Air" or "Coal: Strip Mining the Landscape." How about "Coal Kills."  I like that better - accurate and succinct.

And what's it doing in Louisiana other than tormenting me?

Wednesday, September 5, 2012

Hurricane in the Gulf and the Price of Natural Gas Just Yawns

It used to be that a hurricane entering the Gulf of Mexico - even a measly old Cat 1 storm - would cause price surges and general chaos in the natural gas markets.  Remember the fall of 2005?  Now the news of  3.5 Bcf/day of shut in gas barely elicits a yawn from a pricing perspective.

To say that natural gas prices were not impacted by Hurricane Isaac's arrival is the understatement of the year.

Saturday, September 1, 2012

New Louisiana Completions

  • Pace 8-14-16 H #1, Chesapeake Operating: 11.184 MMcf/day IP on 22/64 in. choke at 5,851 psi; Perfs: 11,422-15,730, length: 4,308 ft.; Bethany Longstreet Field, Bossier Parish, S8/T14/R16; res. A, serial #244163 
  • Pankey 22-14-15 H #1, Chesapeake Operating: 15.408 MMcf/day IP on 22/64 in. choke at 6,651 psi; Perfs: 11,955-16,435, length: 4,480 ft.; Bethany Longstreet Field, DeSoto Parish, S22/T14/R15; res. A, serial #244175 

Haynesville Shale Rig Count: +1 to 24

The Haynesville Shale rig count was up one this week to 24.  Louisiana was down one to 12 and Texas was up two to 12.

Because I'm a little punch drunk with this whole Hurricane Isaac evacuation thing, I'll share with you a transcript of my internal dialogue ("Me" is Id and "Other Me" is Super-Ego):