Friday, November 30, 2012

U.S. Rig Count: -6 to 1,811

The Baker Hughes rig count was down six rigs this week to 1,811.  Oil rigs were down two to 1,386, gas rigs were down four to 424 and miscellaneous rigs were unchanged at one.  By type, horizontal rigs were down four to 1,110, vertical rigs were down one to 508 and directional rigs were down one to 193.  Among gas rigs, horizontal rigs were unchanged at 292, directional rigs were down two to 75 and vertical rigs were down two to 57.

LA Sen. Landrieu Supports LNG Export

At a recent forum in Washington, D.C., Louisiana Sen. Mary Landrieu stated that she supports the export of natural gas from the U.S.  This endorsement comes at a critical time for those wishing to export LNG, with the Department of Energy soon due to complete a market impact study that likely will determine if the nearly 20 applications pending for natural gas export will be eligible to receive approval to export gas to nations that don't have free trade agreements with the U.S. (i.e. the best potential customers).

Sen. Landrieu's decision to support LNG is fraught with conflicts.  Specifically, Louisiana is home to the Haynesville Shale and is the operational hub for most offshore drilling platforms, but it is also home to numerous chemical and manufacturing interests that thrive on cheap natural gas.  Both produce lots of jobs (and potential wealth), so the pro-LNG decision is no simple matter.

Only One New Haynesville Completion This Week in LA

  • Barnes 11-10-14 H #1, Chesapeake Operating: 11.928 MMcf/day IP on unknown choke at 6,255 psi; Perfs: 11,591-15,945, length: 4,354 ft.; Benson Field, DeSoto Parish, S11/T10/R14; res. A, serial #244117

Thursday, November 29, 2012

MIT Study Refutes Earlier "Fugitive" Gas Studies

Yesterday, Massachusetts Institute of Technology (MIT) issued a new comprehensive study on the levels of "fugitive" methane escaping from shale gas wells that showed significantly lower actual emissions than previous studies had estimated (here is a link to the study).  The new study was less theoretical and wider in scope and sample size than other previous studies.  It also used actual field practices to determine realistic levels of methane leakage rather than relying on theoretical estimates.  Quoting the MIT press release, "the amount of methane emissions caused by shale gas production has been largely exaggerated."

In particular, the MIT study rebukes the earlier findings of Cornell professor (and shale gas critic) Robert Howarth, who riled the industry last year with a study saying that natural gas was less environmentally friendly than coal when looking at the life cycle of gas and including gas that escapes during the completion process.  For many on the anti-drilling/fracking side, the concept of fugitive methane replaced the idea that water supplies can be threatened as the main line of protest against drilling.

But the MIT researchers countered that the Howarth study looked at a limited data set and did not take into account actual field practices to limit methane leakage. The MIT study looked at the Barnett, Haynesville, Fayetteville, Marcellus and Woodford Shales, while Howarth only studied the Barnett and Haynesville.  Again, from the MIT press release:
"In studying potential emissions, Howarth found 252 Mg of methane emissions per well in the Barnett site and 4,638 Mg per well in the Haynesville site. The MIT researchers, using their comprehensive well dataset, found that the potential emissions per well in the Barnett and Haynesville sites were in fact 273 Mg and 1,177 Mg, respectively. When accounting for actual gas handling field practices, these emissions estimates were reduced to about 35 Mg per well of methane from an average Barnett well and 151 Mg from an average Haynesville well." 
That's a significant difference worth restating:  Howarth said 252 Mg of methane emitted from a Barnett well while MIT says 35 Mg (14% of Howarth's figure), and Howarth said 4,638 Mg from a Haynesville well while MIT says 151 Mg (3% of Howarth's figure).

The debate will rage on, for sure, but this MIT study is a strong counterargument to the current talking points of those who oppose gas drilling and hopefully will receive the same level of press as the Cornell study.

EIA: Storage +4 Bcf to 3.877 Tcf

After two weeks of net storage withdrawals, this week's EIA working gas in storage report showed a 4 Bcf net increase in natural gas storage, bringing the current level to 3.877 Tcf.  The weekly injection was in line with last year (+2 Bcf) but 22 Bcf above the five year average (-18 Bcf).  The current storage level is now 0.7% above last year (3.851 Tcf) and 5.2% above the five year average (3.687 Tcf).


Temperatures last week averaged 46.7 degrees, 3.6 degrees cooler than last year and 0.4 degrees cooler than the five year average.  But, as the map below shows, the averages can be deceiving.  Cooler temperatures were clustered on the coasts, while much of the country saw above normal temperatures.

Tuesday, November 27, 2012

Encana Reawakening?

It looks like the sleeping Canadian giant may be reawakening in the Haynesville Shale, if only a little bit.  Earlier this month, Encana signed a long-term deal to supply Nucor with natural gas to fuel its steel making plants, especially the new facility being constructed in Convent, LA.  For the first time in ten months, Encana has filed for a new Haynesville permit in Sabine Parish (Terry Greer 16 H, serial #245693).  Encana last had an active rig in the play in May 2012.

It might be a little early to supply the Convent plant, but it is likely that any new gas supply for the facility will come from the Haynesville Shale.  If - and I'm not saying this will happen - Encana does add a rig to drill this well, it would be the first time the Louisiana Haynesville rig count has increased since XTO Energy added a rig in January 27, 2012.  But that increase was short lived as the company dropped all but one of its rigs six weeks later.

Man, it's hard to get even a small victory in the Haynesville these days!

Monday, November 26, 2012

New Texas Permits

  • Bison DU #1H, XTO Energy; Carthage Field (Haynesville Shale), San Augustine Co. Co., Survey: WALKER, I, A-481 
  • CGU 5 #51HH, Anadarko E&P; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: MOORMAN, A, A-427 
  • CGU 5 #52HH, Anadarko E&P; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: MOORMAN, A, A-427 

New Texas Completions

  • CGU 9 #56HH, Anadarko E&P: 6.316 MMcf/day IP, 22/64" choke, 4,095 psi; Perfs: 10,791-16,104, length: 5,313 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: SMITH, M, A-607 
  • Kyle, Fred Gas Unit #52HH, Anadarko E&P: 5.103 MMcf/day IP, 20/64" choke, 5,115 psi; Perfs: 10,633-17,273, length: 6,640 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: ASHTON, M, A-8 

Last Week's Louisiana Completions

  • McFerren25 #1, Chesapeake Operating: 13.848 MMcf/day IP on 22/64 in. choke at 5,757 psi; Perfs: 11,862-15,816, length: 3,954 ft.; Caspiana Field, DeSoto Parish, S36/T16/R14; res. A, serial #240129 
  • Jenkins 34-16-14 H #1, Chesapeake Operating: 14.271 MMcf/day IP on 22/64 in. choke at 6,090 psi; Perfs: 11,868-16,480, length: 4,612 ft.; Caspiana Field, DeSoto Parish, S3/T15/R14; res. A, serial #241069 

Saturday, November 24, 2012

Haynesville Shale Rig Count: -1 to 18

The Haynesville Shale rig count was down one this week to 18.  Louisiana was down one to ten and Texas held at eight.

U.S. Rig Count: +8 to 1,817

The Baker Hughes rig count was up eight this week to 1,817.  Oil rigs were down two to 1,388, gas rigs were up 11 to 428 and miscellaneous rigs were down one to one.  By type, horizontal rigs were up nine to 1,114, vertical rigs were down one to 509 and directional rigs were unchanged at 194.  Among gas rigs, horizontal rigs were up four to 292, directional rigs were up six to 77 and vertical rigs were up one to 59.

Wednesday, November 21, 2012

Happy Thanksgiving!

I'm late reporting the weekly natural gas storage numbers because I spent the day in Bisbee, AZ.  The main purpose of the trip was to tour the Copper Queen Mine, a copper mine dating back to 1887.  The mine closed in 1975 after it was played out, but it struck me that the technology and working conditions underground didn't change much over the 90 or so years that the mine operated. Sure, there were better drills and a little more automation, but the life underground and the process to mine copper didn't really change over the life of the mine.

It got me thinking about the people who are out there working in the "extraction field" today.  Those of us who work "above ground" and are fans of the industry tout the job creation aspect of oil and gas, but we sometimes forget that it is a dangerous occupation.  Just last week we were reminded of the inherent dangers after the explosion offshore at the Black Elk production platform.

I don't have an earth-shattering observation to make other than the fact that we should all be thankful for those who risk their lives just to do their jobs, from oil/gas/mining workers to those serving in the military to those in law enforcement.  They work hard and risk their lives, and we should not forget all that they do.

Thanksgiving should be a very personal holiday. It can be a total drag (did I mention that I am in southern Arizona?), but it should also be a time of personal reflection. Personally, I am thankful that I was born lucky. I was born to a great family in the best country in the world, a place where anyone can accomplish nearly anything. We bicker mightily about the right way to do things, but the framework that the founders of our nation created for our republic make it the most unique place on earth. We must not forget these gifts when we grouse about the details.

Happy Thanksgiving one and all!

EIA: Storage -38 Bcf to 3.873 Tcf

The EIA reported a 38  Bcf net withdrawal from storage last week, bringing the level of working gas in storage to 3.873 Tcf.  The weekly withdrawal compared favorably to benchmarks, being 47 Bcf lower than last year (+9 Bcf) and 41 Bcf lower than the five year average (+3 Bcf).  The current storage level is 0.6% above last year (3.849 Tcf) and 4.5% above the five year average (3.705 Tcf).


Temperatures last week averaged 48.0 degrees, 1.1 degrees cooler than last year and 1.6 degrees cooler than the five year average.

Saturday, November 17, 2012

Haynesville Shale Rig Count: Unchanged at 19

The Haynesville Shale rig count was unchanged this week, holding at 19.  Louisiana was unchanged at 11 and Texas held at eight.



Friday, November 16, 2012

U.S. Rig Count: +3 to 1,809

The Baker Hughes rig count was up three rigs this week to 1,809.  Oil rigs were up one to 1,390, gas rigs were up four to 417 and miscellaneous rigs were down two to two.  By type, horizontal rigs were up one to 1,105, vertical rigs were up two to 510 and directional rigs held at 194.  Among gas rigs, horizontal rigs were up six to 288, directional rigs were up two to 71 and vertical rigs were down four to 58.

New Louisiana Completions

  • Bstone 14-10-14 H #1, Chesapeake Operating: 12.216 MMcf/day IP on 22/64 in. choke at 6,450 psi; Perfs: 11,619-15,636, length: 4,017 ft.; Benson Field, DeSoto Parish, S14/T10/R14; res. A, serial #244491 
  • Evans 30-11-13 H #1, Chesapeake Operating: 14.016 MMcf/day IP on 22/64 in. choke at 6,220 psi; Perfs: 11,943-15,821, length: 3,878 ft.; Benson Field, DeSoto Parish, S30/T11/R13; res. A, serial #244715 
  • M W Lavigne 2 H #1, Beusa Energy: 5.99 MMcf/day IP on 9/64 in. choke at 8,150 psi; Perfs: 12,155-16,771, length: 4,616 ft.; Bethany Longstreet Field, DeSoto Parish, S11/T12/R15; res. A, serial #243969

Thursday, November 15, 2012

Another Export Angle

Kinder Morgan yesterday announced today a 25-year transportation precedent agreement to provide approximately 200 MMcf/day to customers in Mexico through a new 60-mile 36" diameter pipeline that will run from existing mainlines near Tucson, AZ to Sasabe, AZ, which sits at the Mexican border.  The pipeline would then interconnect with a new 500 mile cross-border pipeline being built by Sempra to Guaymas in the Sonora state.  The gas would be used to fuel power plants that are being converted from fuel oil to natural gas.


The proposed pipeline is the result of a request by the Mexican government to build transportation infrastructure to import U.S. natural gas.  Mexico has its own natural gas reserves, including shale, but I guess it is cheaper, easier and faster to import U.S. gas.  Interesting.

The proposed Sasabe pipeline will require Federal Energy Regulatory Commission (FERC) approval and a presidential permit for the border crossing.  Regulatory filings are expected in early 2013.  If approved, construction would begin in Q1 2014 with the first gas flowing in September 2012. 

While 200 MMcf/day is not a massive new demand source, projects like this help diversify the "demand portfolio" for natural gas.  It will be interesting to see if this approval gets caught up in the politics over the export of LNG since it requires a presidential permit.  It might slip under the radar.  Or not.

EIA: Storage -18 to 3.911 Tcf

The EIA storage report showed that working gas in storage has topped out for the year (hopefully!).  By comparison, last year storage peaked the week of November 19.  This week, working gas in storage was down 18 Bcf to 3.911 Tcf.  This compares favorably to past years.  The weekly injection was 38 Bcf lower than last year (+20 Bcf) and 35 Bcf below the five year average (+17 Bcf).  The current storage level is 1.8% above last year (3.82 Tcf) and 5.6% above the five year average (3.685 Tcf).


Temperatures last week averaged 48.0 degrees, which was 1.1 degrees cooler than last year and 1.6 degrees cooler than average.

Monday, November 12, 2012

Petrohawk's Minimum Haynesville Quantites

There has been a parlor game out there to predict when Haynesville Shale production will drop and by how much.  It's counter-intuitive that production has remained rather steady when rig count has dropped nearly 90% from its peak in July 2010.  One of the explanations for the lack of decline has been minimum quantities required by midstream deals struck by the various producers.

Having nothing better to do this morning, I perused the September 2012 financial report for Petrohawk, which is now owned by BHP Billiton.  I happened upon Petrohawk's minimum production commitments for the Haynesville Shale, at least vis-a-vis the gathering and midstream system it sold to Kinder Morgan last year.  Back in May 2010 when Petrohawk formed KinderHawk Field Services, LLC with Kinder Morgan to monetize its gathering and midstream operations, Petrohawk made a commitment to use the gathering system for thirty years and made certain minimum commitments for the first five years (summarized on the chart below).  In July 2011, Petrohawk sold its remaining 50% interest to Kinder Morgan but was required to maintain its minimum quantities or else "pay an annual true-up fee to KinderHawk."


Petrohawk's rig count has dropped from highs in the mid-teens back in 2010, but it has been rather steady since spring.  Early this year, the company actually added rigs (since removed) while everyone else was pulling them.  Given the company's minimum production levels over the next couple of years, I would suggest that Petrohawk is one company that is not going away from the Haynesville Shale anytime soon.

Haynesville Shale Rig Count: Unchanged at 19

The Haynesville Shale rig count was unchanged this week, holding at 19.  Louisiana (11) and Texas (8) were both unchanged.



Friday, November 9, 2012

U.S. Rig Count: +6 to 1,806

The Baker Hughes rig count was up six rigs this week to 1,806.  Oil rigs were up 16 to 1,389, gas rigs were down 11 to 413 and miscellaneous rigs were up one to four.  By type, horizontal rigs were down one to 1,104, vertical rigs were up eight to 508 and directional rigs were down one to 194.  Among gas rigs, horizontal rigs were down one to 282, directional rigs were down three to 69 and vertical rigs were down seven to 62.

Thursday, November 8, 2012

Da Winnas and Da Loozas

What a terrible election season this was.  I'm so relieved not to have to see smiley "surrogates" and pundits on the screen every time I turn on the TV that I might actually start watching cable news again.  The silence is deafening, but in a good way (although the upcoming row about the "fiscal cliff" will certainly break the silence).

While we all try to figure out the real winners and losers from the election, I'm pretty certain that we will be able to put natural gas pretty high in the winner's column.  Even though the energy industry spent big bucks against President Obama (of approximately $116 million spent, 80% went to Repubs, 20% to Dems), his re-election bodes well for gas.  

New Texas Permits (Including a Surprise)

10/30/12 - 11/7/12:
Note the new permit below from Marathon Oil.  This is only their fourth Haynesville/Bossier permit and their first since early 2010.  By my count, Marathon hasn't run a rig in the Haynesville play since April 2010 and does not seem particularly active in other formations in the region.  Does this mean that they are bringing in a rig?
  • New Horizons #I 1H, XTO Energy; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: WALDEN, TW, A-698 
  • Shofner Federal #H 2H, Marathon Oil; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: MOSLEY, JH, A-493 
  • Amazon #1H, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: HOLMES, S, A-287

Only One New Texas Completion This Week

10/30/12 - 11/7/12:
  • Kyle, J.R. 'A' #16HH, Anadarko E&P: 3.49 MMcf/day IP, 18/64" choke, 4,365 psi; Perfs: 10,765-15,965, length: 5,200 ft.; Carthage Field (Haynesville Shale), Panola Co., Survey: ANDERSON, W, A-4

Recent Louisiana Completions

  • Boyet 11 #1-ALT, J-W Operating: 7.473 MMcf/day IP on 14/64 in. choke at 8,200 psi; Perfs: 12,584-16,796, length: 4,212 ft.; Woodardville Field, Red River Parish, S11/T14/R9; res. CV-B, serial #233143 
  • Jestma 22 H #2, Petrohawk Operating: 6.49 MMcf/day IP on 14/64 in. choke at 6,816 psi; Perfs: 11,473-16,090, length: 4,617 ft.; Elm Grove Field, Bossier Parish, S22/T16/R11; res. A, serial #244915 

Storage: +21 Bcf to 3.929 Tcf

The weekly EIA storage report showed a 21 Bcf net injection, bringing the total working gas in storage to 3.929 Tcf.  The weekly injection was 56% below last year (+48 Bcf) and 42% below the five year average (+36 Bcf).  The total storage level is now 2.9% above last year (3.82 Tcf) and 6.6% above the five year average (3.685 Tcf).


Temperatures last week averaged 51.0 degrees, 1.3 degrees warmer than last year and 1.0 degrees cooler than the five year average.

Wednesday, November 7, 2012

Will Sandy Boost Natural Gas?

Living in a hurricane danger zone, I think it is crass to look for winners and losers too soon after a tragic storm like Hurricane/Superstorm Sandy.  Hopefully enough time has passed to make an observation.  One of the bright spots after the storm, especially in New York City, has been the region's natural gas distribution infrastructure, which seems to have weathered the storm very well.  Additionally, many natural gas users for cogeneration and vehicle fuel have found themselves at an advantage over other New Yorkers, which has been attracting lots of media attention.

A portion of the campus of New York University and the Co-op City high rises in the Bronx didn't lose lights and heat because they get their power from highly efficient on-site natural gas-powered generators.  These distributed generation power sources feed microgrids supporting each facility.  Likewise, natural gas fueling stations (the few that there are in the NE) were back up and running quickly.  No waiting for the gas truck - all they need is a functioning supply line and a backup generator.

In the next few years, I expect there will be a minor economic boom in the Sandy-impacted regions with the rebuilding of infrastructure and the payout of insurance monies.  Unfortunately, most of that money will be used to rebuild things the way they were.  There is a psychic benefit to restore things to the way they used to be, and it's much faster than reinventing the proverbial wheel, but people of the region must also ask if there is a better way to do things.

Tuesday, November 6, 2012

Encana/Nucor JV: Is This the New Model?

Today, steel producer Nucor Corporation announced that it had entered into a long-term production joint venture with Encana Oil and Gas to provide natural gas for its U.S. steel making operations.  Nucor will invest $542 million over the next three years and could invest approximately $3.64 billion over the 13 to 22 year term of the agreement.  The announcement was silent on the gas fields involved, but since Nucor is building a massive new plant in Convent, LA, I think the Haynesville Shale might see some renewed interest from Encana.

This agreement is similar to a smaller deal executed between the two parties in 2010.  It also includes provisions where either party can suspend drilling operations if the price of gas gets too low.

While we've seen JV deals involving independent producers partnering with larger domestic and foreign energy companies as well as with financial investors, this might be the first really big deal with a manufacturing consumer.  Given that manufacturing is on the upswing in the U.S. largely because of cheap natural gas, this deal may be a sign of things to come.

The transaction allows Nucor to hedge its forward consumption of gas for around 20 years, which helps it justify large capital expenditures in new facilities and allows it to manage one of its largest operational expenses.  Normally hedging would be accomplished through financial instruments, but those only provide protection for a few years.  Actually owning a piece of the production gives Nucor long-term protection.

Will this be the new model for producers to raise capital and manufacturers to hedge risk?  Not many consumers have the wherewithal to execute a deal like this, which vertically integrates a company into the energy industry.  Also, there may not be that many appropriate opportunities available on the supply side.  But I'm sure there are going to be a bunch of smart bankers running around flogging deals like this in the coming year.  Stay tuned.

Utilities Keep Burning Gas

As further illustration of how gas use by utilities has saved natural gas' keyster (and taken a bite out of coal), natural gas represented 33.3% of the fuel for electric generation in August 2012.  That figure was down 0.4 percentage points from July 2012 but it was up 3.8 points from August 2011.  By comparison, coal basically held its market share from July 2012, but it was down 3.6 percentage points compared to August 2011.


It's even more interesting to see the trends on an annual basis going back to 2002:

August Natural Gas Production and Consumption

This week, the EIA released its monthly energy reports showing the production and consumption of natural gas through the month of August 2012.  Production continued at a pace well above average.  Cumulative dry gas production for the first eight months of 2012 was 15.96 Tcf, which is 21.1% (+2.8 Tcf) above the ten  year average and 5.8% (+877 Bcf) above last year.  Monthly production was 2.023 Tcf, which was up 3.7% (+72 Bcf) from August 2011.


To help offset the increased production, consumption through the first eight months of the year was also higher than average.  Cumulative consumption through August was 15.547 Tcf, which was 8.7% (+1.25 Tcf) above the ten year average and 3.5% (+524 Bcf) above the same months in 2011.  Total consumption in August of 1.804 Tcf was 13.1% above (+209 Bcf) the ten year average and 6.1% (+104 Bcf) above last year.

Monday, November 5, 2012

EXCO Unloads Conventional Properties to JV

EXCO Resources announced this morning that it had created a joint venture with Harbinger Group, Inc. that contains EXCO's north Louisiana and east Texas shallow properties and its Canyon Sand and other west Texas assets.  The transaction includes Cotton Valley assets in the Holly, Waskom, Danville and Vernon fields.  There are no Haynesville assets in the transaction.

EXCO ended up with $597.5 million, of which $372.5 million will be received up front and used to pay down debt.  EXCO will own 25.5% of the new JV.  The NLA/ETX properties are actively producing right now but they are not prospective for more drilling until natural gas prices improve.

Haynesville Shale Rig Count: Unchanged at 19

The Haynesville Shale rig count did not change this week, holding at 19, unchanged in both Louisiana (11) and Texas (8).

Friday, November 2, 2012

Two New Louisiana Completions


  • Willis 25 H #2-ALT, Petrohawk Operating: 6.448 MMcf/day IP on 14/64 in. choke at 6,973 psi; Perfs: 12,241-16,786, length: 4,545 ft.; Elm Grove Field, Bossier Parish, S36/T16/R11; res. A, serial #244642 
  • Bilbray 2-10-14 H #1, Chesapeake Operating: 9.96 MMcf/day IP on 22/64 in. choke at 6,020 psi; Perfs: 11,296-15,623, length: 4,327 ft.; Benson Field, DeSoto Parish, S2/T10/R14; res. A, serial #244161

U.S. Rig Count: -26 to 1,800

The Baker Hughes rig count dropped by 26 rigs this week to 1,800.  Oil rigs were down 35 to 1,373 (lowest level since 5/11/12), gas rigs were up eight to 424 and miscellaneous rigs were up one to three.  By type, horizontal rigs were unchanged at 1,105, vertical rigs were down 12 to 500 and directional rigs were down 14 to 195.  Among gas rigs, horizontal rigs were up eight to 283, directional rigs were down one to 72 and vertical rigs were up one to 69.

Thursday, November 1, 2012

Sandy's Impact on Natural Gas


A lot of people are wondering about Hurricane Sandy's impact on the upcoming presidential election.  I'm curious too.  But I also wonder what her impact will be on natural gas.  In its weekly natural gas report, the EIA had this to say about natural gas consumption in the Northeast post-Sandy:
"In the Northeast, natural gas power burn generally fell over the past few days, possibly as a result of reduced demand for electricity, according to data from BENTEK Energy LLC (Bentek). Estimates for natural gas consumed for power generation were 3.9 billion cubic feet (Bcf) today, compared to 4.4 Bcf on Monday. Any declines in natural gas-fired generation because of electric power demand destruction may be somewhat mitigated by power producers substituting natural gas for lost nuclear capacity resulting from the storm. According to the situation report, three nuclear reactors remained offline as of this morning, and two units that had been operating at reduced capacity had been restored to close to full capacity.
"Residential and commercial consumption in the Northeast increased significantly during the past couple of days, surpassing 11 billion cubic feet (Bcf). Increases were especially pronounced in areas in the Appalachian mountains, where blizzards and high levels of snow resulted from Hurricane Sandy." (emphasis mine)
Bottom line:  natural gas consumption for power has not decreased as much as expected because of nuclear outages and consumption in residential and commercial is up because of the cold weather.  It looks like gas use might actually increase, at least temporarily, as a result of Sandy.  Not what I expected, but it's OK with me.


If you are interested, make sure to check out the daily situation reports from the EIA.  Here is one from today.  

Questar CEO on Haynesville's Strategic Importance

In its third quarter conference call yesterday, QEP Resources (formerly Questar) CEO Charles Stanley was asked about the strategic importance of the Haynesville Shale.  Stanley responded "the Haynesville asset is a very high quality dry gas asset" but added, "(w)e are deemphasizing it in the current price environment."  He continued,
"So in terms of importance today, the Haynesville is not attracting capital because we have much higher return places to invest. But I would say that it is a great asset. It's an asset that we now have completely held by production. And it's a part of our portfolio that awaits a return to higher gas prices and/or lower completed well costs. And a combination of those 2 things or a dramatic change in one or the other could cause it to attract a significant capital allocation in coming years."
QEP's only planned capital spending in the play is to complete five already drilled and cased wells.  Still, the company expects a 30% production decline in 2013 (from 110 Bcfe/year to 75).  Production declined 10% in Q3 2012.

Given the comments above and the fact that the company recently invested $1.4 billion in the Williston Basin, I don't expect to see much of an effort from QEP to drill new rigs in the Haynesville now that its acreage position is held by production.  The good news is that the threshold may be lowering now that drilling costs are going down (EXCO expects its Haynesville wells to cost $8.0 million by year end) and natural gas prices are starting to rise, but the big question is whether either of those two factors are sustainable.

EIA: Storage +65 Bcf to 3.908 Tcf

The EIA storage report showed a 65 Bcf increase, bringing the total working gas in storage to 3.908 Tcf.  The weekly injection was 21% below last year (+82 Bcf) but 14% above the five year average (+57 Bcf).  The current storage level is 3.6% above last year and 7.1% above the five  year average.


Temperatures last week averaged 58.7 degrees, which was 3.9 degrees warmer than last year and 4.4 degrees warmer than the 30 year average.