Tuesday, July 30, 2013

Gas Prices Sliding

The Henry Hub spot price of natural gas closed at $3.49/MMBtu yesterday, which is down 8% from a week ago Friday and down 20% from mid-April.  Prices tend to trend down during the second half of summer, so it's not a big surprise, but it's no fun to watch.

New Pipeline to Double Natural Gas Available in Florida

On Friday, Sabal Trail Transmission, LLC, a joint venture between Spectra Energy Corp. and NextEra Energy, Inc., announced that it had awarded a contract to build a $3 billion, 465 mile natural gas pipeline from central Alabama to central Florida. The primary customer will be Florida Power & Light (a subsidiary of NextEra) and the gas will be used primarily for power generation.  The 1 Bcf/day pipeline, which is expected to be in service by 2017, would double the amount of natural gas flowing to Florida and allow FP&L to replace current power stations that burn coal and oil.


This is a big deal.  We've seen lots of pipelines built to transport natural gas out of the glutted producing regions, but this is a case of a new fat pipe delivering gas to an underserved consumer that will use it to displace competing power sources.

Monday, July 29, 2013

Haynesville Shale Rig Count: +1 to 27

The Haynesville Shale rig count was up by one last week to 27, which is the highest rig count for the past 12 months (last at 27 on 7/27/12).  Louisiana was up two to 16 (both EXCO) and Texas was down one to 11 (Valence).


Friday, July 26, 2013

Rest in Peace George Mitchell, Father of Shale Gas

I was sad to learn today of the passing of George Mitchell, who led his company, Mitchell Energy, to unlock the secrets of shale gas in the Barnett Shale in the 1990's.  Mr. Mitchell was a case study in the power of careful research and dogged persistence.

U.S. Rig Count: +6 to 1,776

The Baker Hughes U.S. rig count was up by six this week to 1,776.  Oil rigs were up six to 1,401, while gas rigs held at 369 and miscellaneous rigs were unchanged at six.  By type, horizontal rigs were up nine to 1,067, vertical rigs were down ten to 422 and directional rigs were up seven to 287.  Among gas rigs, horizontal rigs were up three to 254, directional rigs were down one to 78 and vertical rigs were down two to 37.

Thursday, July 25, 2013

EIA: Storage +41 Bcf to 2.786 Tcf

The EIA working gas in storage report showed a 41 Bcf increase this week to 2.786 Tcf.  The weekly injection was 58% higher than last year (+26 Bcf) but 23% below the five year average (+53 Bcf).  This is the second consecutive week that the injection came in below the five year average.  The current storage level is 12.5% below last year (3.185 Tcf) and 1.6% below the five year average (2.832 Tcf).


Temperatures last week in the Lower 48 averaged 77.4 degrees, 0.1 degrees cooler than last year and 2.0 degrees warmer than average.

Wednesday, July 24, 2013

DOE Fracking Study Reveals "Nothing of Concern"

Last week, the Department of Energy released some preliminary results from a study conducted on a Marcellus Shale gas well in Pennsylvania that revealed that hydraulic fracturing fluids did not come close to contaminating ground water.  This DOE study is one of several important studies nationwide to try to determine if there is any impact on groundwater from fracking.

In the Marcellus study, an unnamed producer drilling a well in Greene County, southwest of Pittsburgh, allowed the DOE research team to tag the well's drilling fluids with unique markers that were tracked.  The study also looked at how far the fractures migrated.  The well was drilled to 8,000 feet, and the researchers found that the fluids did not get into the study's monitoring zone at 5,000 feet below the surface.  Since ground water seldom lies deeper than 500 feet, this is good news for fracking proponents.

The results are preliminary, but the oil and gas industry is already taking a victory lap.

Japan's Import of LNG Decreases

The Wall Street Journal reported that Japan, the world's largest importer of liquefied natural gas (LNG), has seen natural gas imports slide since the first half of 2012.  Gas imports spiked following the disaster at the Fukushima Daiichi nuclear plant caused by the earthquake and subsequent tsunami hit the island nation in March 2011.  Japan shut down 48 of its 50 nuclear reactors and largely has been dependent on imported fuel sources.

Demand for imported gas peaked in the first half of 2012 and has been sliding ever since, mostly because over the past two years Japan has increased its use of coal, which is cheaper than imported gas.  As Japan gets closer to restarting some of its idled nuclear reactors, gas imports should continue to decline.

U.S. Natural Gas Storage Capacity Increases Approximately 2%

The EIA announced today that the total amount of natural gas storage capacity increased in 2012 by 1.8%.  The demonstrated maximum capacity (the practical measure of full storage) rose by 77 Bcf to 4.265 Tcf, while the design capacity (the theoretical measure - it's difficult and expensive to truly max out storage) increased by 91 Bcf to 4.575 Tcf.  The demonstrated maximum capacity is approximately 93% of design capacity.

The EIA estimates that 2013 will see an additional 71 Bcf of designed storage based on projects currently on the books.

The locations and types of storage projects completed in 2012 are indicated on the map below:

Monday, July 22, 2013

Haynesville Shale Rig Count: +1 to 26

The Haynesville Shale rig count was up one last week to 26.  Louisiana was down one to 14 (EXCO), while Texas was up two to 12 (Anadarko and XTO).


Friday, July 19, 2013

U.S. Rig Count: +11 to 1,770

The Baker Hughes U.S. rig count was up 11 this week to 1,770. Oil rigs were up four to 1,395, gas rigs were up seven to 369 and miscellaneous rigs held at six. By type, horizontal rigs were unchanged at 1,058, vertical rigs held at 432 and directional rigs were up 11 to 280. Among gas rigs, horizontal rigs were up one to 251, directional rigs were up five to 79 and vertical rigs were up one to 39.

Thursday, July 18, 2013

Only One New Texas Permit this Week

7/8/13 - 7/17/13:
  • Murray #1HB, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: FORSYTH, J, A-204

New Texas Completions

6/17/13 - 7/17/13:
  • ACLCO Hay GU #1H, Goodrich Petroleum: 8.229 MMcf/day IP, 21/64" choke, 6,400 psi; Perfs: 15,737-20,698, length: 4,961 ft.; Carthage Field (Haynesville Shale), Angelina Co., Survey: RICHARDSON, T, A-525 
  • Woodley #5H, Sabine Oil & Gas: 9.692 MMcf/day IP, 20/64" choke, 5,595 psi; Perfs: 11,407-15,998, length: 4,591 ft.; Carthage Field (Haynesville Shale), Harrison Co., Survey: HUMPHRIES, W , A-299 

EIA: Gas in Storage +58 Bcf to 2.745 Tcf

The EIA reported that working gas in storage was up 58 Bcf this week to 2.745 Tcf.  The weekly injection was double last year (+29 Bcf) but 17% below the five year average (+70 Bcf).  That breaks a six week losing streak against the five year average.  The current storage level is now 13.1% below last year (3.159 Tcf) and 1.2% below the five year average (2.779 Tcf).


Monday, July 15, 2013

Haynesville Shale Rig Count: -2 to 24

The Haynesville Shale rig count was down by two rigs this week to 24.  The count was down one in Louisiana (Chesapeake) to 14 and down one in Texas (XTO) to 10.


New Louisiana Completions

  • Elm Grove Plt. 25 H #1-ALT, Petrohawk (WSF): 6.799 MMcf/day IP on 14/64 in. choke at 7,065 psi; Perfs: 11,545-16,140, length: 4,595 ft.; Elm Grove Field, Bossier Parish, S24/T16/R12; res. LCV-A, serial #244354 
  • Johnson 16-14-15 H #2-ALT, Chesapeake Operating: 13.896 MMcf/day IP on 22/64 in. choke at 6,088 psi; Perfs: 11,986-16,423, length: 4,437 ft.; Bethany Longstreet Field, DeSoto Parish, S16/T14/R15; res. A, serial #243681 

Friday, July 12, 2013

U.S. Rig Count: +2 to 1,759

The Baker Hughes U.S. rig count was up two this week to 1,759.  Oil rigs were down four to 1,391, gas rigs were up seven to 362 and miscellaneous rigs were down one to six.  By type, horizontal rigs were down 10 to 1,058, vertical rigs were down two to 432 and directional rigs were up 14 to 269.  Among gas rigs, horizontal rigs held at 250, directional rigs were up five to 74 and vertical rigs were up two to 38. Interestingly, directional gas rigs are up 49% (up 24 from 50) over the past two months since May 17.

Thursday, July 11, 2013

Look for More EXCO Deals

Throughout Monday's conference call to explain the company's acquisition of Chesapeake Energy assets in the Haynesville and Eagle Ford shales, EXCO Resources CEO Douglas Miller made numerous references to the fact that EXCO is actively seeking new deals and that his company (and others) have a unique window of opportunity to make favorable acquisitions, especially in natural gas.  Miller said that EXCO sees lots of upcoming demand for natural gas, as the company gets "numerous calls" each week from industrial users, power generators and foreign countries.  As Miller said on Monday's call, he sees a big increase in demand coming, but he can't promise there will be any commensurate price increase.

But that's still good news for EXCO because the company is focused on "factory production" in its core areas like the Haynesville and will be able to generate prodigious quantities of gas while constantly suppressing costs.  In its acquisitions, the company is targeting doubles rather than home runs, and that is the proper perspective to have to be successful in the current natural gas market.

EIA: Storage +82 Bcf to 2.687 Tcf

The EIA storage report showed an 82 Bcf net injection this week, bringing the total working gas in storage to 2.687 Tcf.  The weekly injection was 141% greater than last year (+34 Bcf) and 11% above the five year average (+74 Bcf).  The current storage level is 14.2% below last year (3.13 Tcf) and 0.8% below the five year average (2.709 Tcf).


Tuesday, July 9, 2013

More on EXCO Acquisition of Chesapeake DeSoto Acreage

EXCO Resources held a conference call yesterday to provide more details of its $1 billion asset acquisition of certain Chesapeake Energy assets in the Haynesville and Eagle Ford shales (link to conference call - only temporary; link to presentation).  In the 9,600 net acre Haynesville deal, EXCO is acquiring around 5,600 acres in sections already operated by EXCO and about 4,000 acres in sections operated by Chesapeake.  The Haynesville acreage produced 114 MMcf/day in May (including about 1.5 to 2.0 MMcf/day of Cotton Valley production that will be sold into the company's existing partnership with Harbinger Group).

The acquisition also allows for 55 new Haynesville drilling locations in the Chesapeake acreage.  EXCO noted in the conference call that it might add three new rigs going forward, but that decision has not been finalized.  All of the acreage is in DeSoto Parish, as shown on the map below.

Sunday, July 7, 2013

Haynesville Shale Rig Count: +1 to 26

The Haynesville Shale rig count was up one this week to 26.  Louisiana was unchanged this week at 15, while Texas was up one to 11 (Anadarko).

New Texas Permits

6/17/13 - 7/7/13:

  • CGU 13 #54HH, Anadarko E&P; Carthage Field (Haynesville Shale), Panola Co. Co., Survey: HUGHES, HRS J, A-278 
  • Indus #1H, XTO Energy; Carthage Field (Haynesville Shale), Shelby Co. Co., Survey: HALEY, MA, A-276 

Wednesday, July 3, 2013

Will "Cheap Gas" Outlast "Clean Coal?"

The Wall Street Journal had an interesting article on the status of "clean coal" technology [I'll add link later] that coincides with the opening this month of the first "clean coal" plant in the U.S.  (Regular readers of this space know that I am no fan of coal and I believe "clean coal" is too much of an oxymoron to type without quotation marks.)  In any case, the "technology" (feel my skepticism) for burning coal with lower airborne environmental impact is evolving, albeit slowly.  But will it evolve in time before becoming a relic in the age of inexpensive natural gas?

The utility industry's marqee "clean coal" project has long been the recently opened Duke Energy Edwardsport Integrated Gasification Combined Cycle (ICGC) power plant in Edwardsport, IN, a mess of a project.  The plant is overdue and over-budget, with a price tag of $3.5 billion that doesn't even include carbon capture equipment that could add several hundred million dollars, if ever implemented.  The big technology advance here is the gasification of the coal before it is burned, but without carbon capture on the back end there is no significant reduction in CO2 versus a typical coal plant.  At least many of the particulate pollutants are removed, but the project doesn't quite seem marquee to me without a reduction in CO2.  The price tag for the unfinished Kemper ICGC plant in eastern Mississippi being built by Southern Companies is $4.3 billion and counting.  At least Kemper has carbon capture technology to be able to harness some of the waste CO2 and sell it to oil drillers to stimulate aging fields. But it comes at a monetary price.

But the big question behind all of this money being poured into making coal burn cleaner - but not as clean as natural gas - is:  why bother?

U.S. Rig Count: +9 to 1,757

The Baker Hughes U.S. rig count showed a nine rig increase this week to 1,757.  Oil rigs were up five to 1,395, gas rigs were up two to 355 and miscellaneous rigs were up two to seven.  By type, horizontal rigs were up one to 1,068, vertical rigs were down seven to 434 and directional rigs were up 15 to 255.  Among gas rigs, horizontal rigs were up five to 250, directional rigs were down one to 69 and vertical rigs were down two to 36.

EXCO Acquires Some Chesapeake Assets in Haynesville (and Eagle Ford) (and Partners with KKR in Eagle Ford)

EXCO Resources announced this morning that it has acquired approximately 9,600 net acres in the Haynesville Shale for around $320 million.  Sounds like a high price, but it is mostly actively operating proven acreage.  Quoting from the press release, the Haynesville portion of the acquisition includes the following:
  • Average net production of approximately 114 million cubic feet of natural gas equivalent per day in May
  • Non-operating interests in 170 EXCO operated wells in EXCO core area
    • Approximately 5,600 net acres
  • Operating interests in 11 operated wells directly offset to EXCO core area
    • Approximately 4,000 net acres
    • Adds approximately 55 identified drilling locations

The play for EXCO is to expand upon the company's existing acreage and consolidate ownership of its existing production.  The effective date for the Haynesville portion of the acquisition is backdated to January 1, 2013.  The company will have a conference call on Monday to provide more specifics.

EIA: Gas in Storage +72 Bcf to 2.605 Tcf

The EIA reported that working gas in storage was up 72 Bcf to 2.605 Tcf this week.  The weekly injection was 76% greater than last year (+41 Bcf) but in line with the five year average (+71 Bcf). The current storage level is now 15.9% below last year (3.096 Tcf) and 1.1%, or 30 Bcf, below the five year average (2.635 Tcf).