Friday, August 31, 2012

U.S. Rig Count: -4 to 1,894

The Baker Hughes rig count dropped by four to 1,894 this week.  Oil rigs were up 11 to 1,419, gas rigs were down 13 to 473 and miscellaneous rigs were down two to two.  Horizontal rigs were down ten to 1,149, vertical rigs were up seven to 526 and directional rigs were down one to 219.  Among gas rigs, horizontal rigs were down 15 to 325, directional rigs were up three to 88 and vertical rigs were down one to 60.

Thursday, August 30, 2012

EIA: Storage +66 Bcf to 3.374 Tcf

The EIA working gas in storage report showed a 66 Bcf increase, bringing the total gas in storage to 3.374 Tcf.  The weekly injection was slightly higher but otherwise in line with last year (+60 Bcf) and the five year average (+62 Bcf).  Technically, it breaks a several months long string of beating prior year injections.  The current storage level is 14.6% above last year (2.945 Tcf) and 12.0% above the five year average (3.013 Tcf).


Temperatures last week averaged 72.3 degrees, which is 3.4 degrees cooler than last week and 1.3 degrees cooler than average.

Tuesday, August 28, 2012

Haynesville Shale Rig Count: -1 to 23

The Haynesville Shale rig count was down one rig last week to 23.  Louisiana held at 13, while Texas dropped one rig to 10.  Sorry for the delayed posting, but I've been neck deep in hurricane prep.



Friday, August 24, 2012

U.S. Rig Count: -16 to 1,898

The Baker Hughes count of working rigs in the U.S. was down 16 this week to 1,898.  Oil rigs were down 17 to 1,408, gas rigs were up two to 486 and miscellaneous rigs were down one to four.  By type, horizontal rigs were up six to 1,159, vertical rigs were down 13 to 519 and directional rigs were down nine to 220.  Among gas rigs, horizontal rigs were up five to 340, directional rigs were down two to 85 and vertical rigs were down one to 61.

Cool Natural Gas Drilling Graphic

Visual Capitalist, in association with Gregory Kallenberg's excellent film series The Rational Middle, has created a great infographic that explains shale gas drilling and production.  It is very objective, stating the facts and risks on equal footing, placing both in a larger context.  The graphic doesn't try to explain the big picture of natural gas but rather focuses on the hot button issue of its extraction.  I've placed a thumbnail of the image on the right side of this post, but here is a link to the original image.  Very cool.

Thursday, August 23, 2012

New Louisiana Completions

  • Whitney Corp 20 H #1, Petrohawk Operating: 6.833 MMcf/day IP on 14/64 in. choke at 7,954 psi; Perfs: 12,085-16,650, length: 4,565 ft.; Benson Field, DeSoto Parish, S17/T10/R13; res. A, serial #244384 
  • Waldron 7 #6-ALT, EXCO Operating: 10.603 MMcf/day IP on 17/64 in. choke at 7,108 psi; Perfs: 12,297-16,517, length: 4,220 ft.; Caspiana Field, DeSoto Parish, S7/T14/R12; res. A, serial #243836 

It's Hot Out There

The National Oceanic and Atmospheric Administration reported that July 2012 was the hottest month ever on record for the lower 48 states.  Ever!  The average temperature was 77.6 degrees, which was 3.3 degrees warmer than the average July temperature for the previous century.


The map above is pretty astonishing and certainly underscores all we've heard about the devastating drought U.S. farmers have experienced this year.  The high temperatures, combined with a reduction in natural gas production and drilling, has helped keep a lid on natural gas storage and has given some support to prices.  Given the suffering the heat has caused, I hate to look for silver linings...but the heat certainly provided one for natural gas.

It is pretty amazing, but looking back to April 5, 2012, the storage level was 60.5% above the five year average.  Last week storage was only 12.1% above the five year average.  I rank that as a significant development.  No doubt that it has been painful on many fronts to get to this level, but it's not something I thought would be achievable without some kind of external factors.  Here is what it looks like graphically from January 2012:


Wow.

EIA: Storage +47 Bcf to 3.308 Tcf

EIA reported that working gas in storage increased by 47 Bcf this week, bringing the total gas in storage to 3.308 Tcf.  The weekly injection was 29% lower than last year (+66 Bcf) and 11% below the five year average (+53 Bcf).  The current storage level  is now 14.7% above last year (2.819 Tcf) and 12.1% above the five year average (2.898 Tcf).


Temperatures last week averaged 75.1 degrees, 0.9 degrees warmer than last year and 0.7 degrees warmer than average.

Tuesday, August 21, 2012

EPA Curbs on Coal Plant Pollution Overturned

A U.S. Court of Appeals in Washington today overturned the EPA's cross-state air pollution rule, which was to be used to limit harmful emissions from coal powered electrical plants.  This is a win for the coal industry and utilities with lots of coal generation and an short-term setback to the natural gas industry and people who don't like to breathe polluted air.

In the end, however, I think it is really more of a "stay of execution," as one analyst put it, for aging coal plants.  Market forces (i.e. lower, more stable natural gas prices) and the threat of future regulation (both federal, state and local) have largely convinced utilities that older coal plants are more of a burden than a benefit.  Coal generation is not going away, but it will be a smaller player on the power scene going forward. The difference is that the utility industry will have more control over timing.

Monday, August 20, 2012

China to Invest in Cheniere LNG Export Project

News comes today that China Investment Corp. (CIC) is an investor in the Blackstone Group-led equity investment in Cheniere Energy's LNG export project.  CIC is a passive investor in the project, but news of this investment is sure to make this project an even hotter topic than it is already.

A Month's Worth of Texas Haynesville Completions

7/18/12 - 8/20/12:

  • Sarge Unit #1HR, EOG Resources: 16,190 MMcf/day IP, 19/64" choke, 9,915 psi; Perfs: 15,931-21,031, length: 5,100 ft.; Carthage Field (Haynesville Shale), Angelina Co., Survey: ANDERSON, W, A-58 
  • Holcombe #11H, XTO Energy: 8.467 MMcf/day IP, 16/64" choke, 5,573 psi; Perfs: 11,006-17,245, length: 6,239 ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: ELLIOT, H, A-241 

Sunday, August 19, 2012

One Month of New Texas Permits

7/20/12 - 8/19/12:

  • Jernigan Deep Gas Unit #2H, XTO Energy; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: MANN, W , A-431 
  • Jernigan Deep Gas Unit #4H, XTO Energy; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: MANN, W , A-431 

Haynesville Shale Rig Count: Unchanged at 24

The Haynesville Shale rig count was unchanged this week.  Louisiana held at 13 and Texas held at 11.




The Reality of Exporting LNG

I have to say that I have been a bit surprised at the battle developing in Washington over the exportation of liquefied natural gas from the U.S.  I view it as a win-win for the U.S. because it provides a means to raise the floor on natural gas prices to a more economic level to support this valuable industry while boosting U.S. exports to offset our appetite for imported plastic crap (and foreign oil).  It will not lead to massive price spikes but rather will be another tool in the chest to make gas production economically viable.

Export seems reasonable to me given that natural gas is one of the few growth industries these days in the U.S. other than developing iPhone apps.  But an odd association of environmentalists and industrialists have put up a robust fight against LNG exports.  The former arguing that exporting gas will lead to more drilling and therefore more hydraulic fracturing, and the latter arguing (behind the scenes) that they need "cheap gas" to foster the "manufacturing renaissance" that we've all now read about in the papers.  The battle rages on in the op/ed pages, as witnessed by another think tanker publishing a pro-export article in the New York Times today.

As I've previously stated, I've got problems with both arguments against exporting.  Environmentalists are playing on fear without facts, saying that gas drilling will pollute everything in sight.  In doing so, they indirectly are arguing to maintain the coal-based status quo, which is hardly a solution to pollution.  The industrialists are playing on greed and possibly stupidity.  If they are building chemical plants counting on sub-$4/MMBtu gas, they are delusional and should be out of jobs.

Friday, August 17, 2012

U.S. Rig Count: -17 to 1,914

The Baker Hughes U.S. count of working rigs was down 17 to 1,914 this week.  Oil rigs were down seven to 1,425, gas rigs were down 11 to 484 and miscellaneous rigs were up one to five.  By type, horizontal rigs were down eight to 1,153, vertical rigs were down 11 to 532 and directional rigs were up two to 229.  Among gas-directed rigs, horizontal rigs were down seven to 335, directional rigs were up two to 87 and vertical rigs were down six to 62.

Thursday, August 16, 2012

Three Weeks of Louisiana Completions (Incl. Lots of Lormand)

  • Maxie Almond 11 H #1, SWEPI, LP: 24 MMcf/day IP on 24/64 in. choke at 8,580 psi; Perfs: 13,095-17,600, length: 4,505 ft.; Gahagan Field, Red River Parish, S12/T12/R10; res. A, serial #243966 
  • Madden 20 H #1-ALT, Forest Oil: 12.043 MMcf/day IP on 18/64 in. choke at 8,313 psi; Perfs: 13,235-17,590, length: 4,355 ft.; Woodardville Field, Red River Parish, S17/T14/R9; res. A, serial #244141 

American Coal Industry Continues to Grow (Just Like Tobacco)

Much has been made lately by the U.S. coal industry how the U.S. government is strangling them and killing jobs.  While that sounds like a nice outcome to me, the reality is far different.  True, the U.S. has been instituting pollution policies that move our nation beyond coal (as the Sierra Club likes to say) for power generation, but worldwide the demand for coal is growing stronger because of explosive growth in developing countries, most notably China and India.  This creates an opportunity for the coal industry to export the stuff while the U.S. slowly weans itself off the poison.

While that's bad for the environment, it's economically good for the U.S., which is poised to become a significant coal exporter.  Yesterday, the governor of Kentucky announced a new 25 year deal to export around $7 billion of Kentucky and West Virginia coal to India (also here).  India's Abhijeet Group struck the deal with New Jersey-based FJS Energy, LLC to import around nine billion tons of Appalachian coal per year.

Exporting coal helps maintain and create jobs in the U.S. while helping offset our trade deficit caused by our addiction to electronics, textiles and cheap plastic crap produced in Asia.  But while coal industry representatives complain about Washington, coal industry employment is at a current two decade high. Things aren't all that bad for them.

The current situation is tough for coal companies without an export presence because of a recent decrease in domestic coal consumption, mostly because of low natural gas prices that have led to displacement of coal for natural gas in U.S. energy production.  These weakening companies face bankruptcy and/or become acquisition targets for stronger, better diversified coal producers.  Sucks for them, but that's how free market capitalism works.

The coal industry complains - a lot - but don't weep for them.  They will figure out a way to sell coal to international customers, just like the tobacco companies have done.  The cigarette industry is a good parallel for coal.  Both sell something that is bad for our health but is also deeply rooted in American history.  Both have seen (or in the case of coal, will see) domestic decline in the use of their product because of increased regulation aimed at improving the environment and human health.  But for both industries, the salvation lies overseas.  The tobacco industry figured this out decades ago.  Coal is working on it right now.

EIA: Storage +20 Bcf to 3.261 Tcf

The EIA working gas in storage report showed a 20 Bcf net increase to 3.261 Tcf.  The weekly injection was 53%, or 23 Bcf, below both last year and the five year average.   The current storage level is 15.7% above last year (2.819 Tcf) and 12.5% above the five year average (2.898 Tcf).


Temperatures last week averaged 78.1 degrees, 0.4 degrees warmer than last year and 3.1 degrees warmer than average.

Wednesday, August 15, 2012

CNG Magnolia Special on Leno's Garage

Last year, I wrote about New Orleans designer J.T. Nesbitt's really cool CNG car called the Magnolia Special.  The car and designer were featured on an episode of Jay Leno's show, "Leno's Garage."



t is a great interview about the vehicle and it constantly extols the virtue of natural gas.  If you'd prefer to watch the show on YouTube, here is the link.  It's fun to see two gearheads talking about the vehicle and to see someone execute such an interesting ambitious project.

Back in Town...

After two weeks on the road, I'm finally back in town.  It will take me a few days to catch up, but I'll be posting new completions in TX and LA (not a whole lot over the past two weeks, unfortunately) and catch up on the news of the day.

Monday, August 13, 2012

Haynesville Shale Rig Count: -2 to 24

The Haynesville Shale rig count dropped by two last week to end at 24. Louisiana held at 13, while Texas was down two to 11.  This marked the first time since drilling really kicked off in the area that Red River Parish, LA didn't have a working rig.



Friday, August 10, 2012

U.S. Rig Count: +1 to 1,931

The Baker Hughes U.S. rig count was up one rig this week to 1,931.  Oil rigs were up three to 1,432, gas rigs were down three to 495 and miscellaneous rigs were up one to four.  By type, horizontal rigs were up six to 1,161, vertical rigs were down four to 543 and directional rigs were down one to 228.

Among gas rigs, horizontal rigs were down two to 342, directional rigs were up one to 85 and vertical rigs were down two to 68.

Thursday, August 9, 2012

EIA: Storage +24 Bcf to 3.241 Tcf

The EIA working gas in storage report showed a 24 Bcf injection, bringing the total gas in storage to 3.241 Tcf.  The weekly injection was 23% lower than last year (+31 Bcf) and 47% below the five year average (+45 Bcf).  The current storage level is 16.8% above last year (2.776 Tcf) and 13.5% above the five year average (2.81 Tcf).


Temperatures last week averaged 77.4 degrees, 2.0 degrees cooler than last year and 2.0 degrees warmer than average.

Monday, August 6, 2012

Haynesville Shale Rig Count: -1 to 26

The Haynesville Shale rig count was down one to 26 this week.  Louisiana was down one to 13, while Texas held at 13.  This marks the first time since Haynesville drilling kicked off in earnest four plus years ago that Louisiana didn't have more Haynesville rigs than Texas.



Friday, August 3, 2012

U.S. Rig Count: +6 to 1,930

The Baker Hughes U.S. rig count was up six rigs this week to 1,930.  Oil rigs were up 13 to 1,429 gas rigs were down seven to 498 and miscellaneous rigs held at three.  This is the lowest gas rig count since July 30, 1999.  By type, horizontal rigs were up four to 1,155, vertical rigs were up 14 to 547 and directional rigs were down 12 to 228.


Among gas rigs, horizontal rigs were down five to 344, directional rigs were down 13 to 84 and vertical rigs were up 11 to 70.

Thursday, August 2, 2012

EIA: Storage +28 Bcf to 3.217 Tcf

The EIA reported a 28 Bcf increase in working gas in storage this week, bringing the total storage level to 3.217 Tcf  The weekly injection was 35% below last year (+43 Tcf) and 50% below the five year average (+56 Bcf).  The current storage level is 17.2% above last year (2.702 Tcf) and 14.5% above the five year average (2.754 Tcf).  Slowly chipping away at it...

Temperatures last week averaged 77.9 degrees, 1.9 degrees warmer than last year and 2.6 degrees warmer than average.


We've been walking a razor's edge for the past several months as storage levels have gradually decreased because of a combination of decreased gas drilling and production and increased use of natural gas in power generation.  The EIA published the illustration below which shows just how much greater the "Summer Power Burn" has been this year (red line) versus the past five years (gray shading).  Gas benefited both from low commodity prices relative to coal and from high temperatures that caused increased use of gas plants, which are used for peak periods because they can be turned on and off more efficiently than coal plants, meaning that a portion of the increased use of gas this summer has occurred irrespective of price.  It pains me to say it, but, yay, hot weather!