Wednesday, November 16, 2016

Gas in the Time of Trump

It's been interesting to watch the world react to the prospects of a Trump presidency over the past week.  Like him or hate him, the one constant is that nobody knows what the hell he will do.  We've elected the ultimate wild card.  Much has been said over the past week about his impact on natural gas, and all I can say is "who knows?"  I personally believe the Pragmatic Trump will emerge, but I feel that I would have the same luck with my predictions at the horse track.

First, it must be noted that natural gas over the past decade is the quintessential American story.  Ingenuity and persistence led to new technology, which opened up vast reserves of gas.  Entrepreneurs rushed in to exploit the myriad of opportunities.  All that work led to a structural oversupply of gas, which tilted the market and suppressed prices.  Low prices "culled the herd" of entrepreneurs but simultaneously impacted other markets, specifically coal-fired power and LNG.  Cheap gas tipped the scales in the power market from coal towards gas (let's be perfectly clear:  George Mitchell did more to "kill coal" than Obama ever could have) and vast amounts of capital have been invested in terminals to export natural gas.  And then it really got messy.  But the bottom line is that we in the U.S. have an enormous natural gas resource that should be a force for economic good in this country.

Friday, November 4, 2016

Rig Count 40% Above Recent Lows

U.S. rig counts have seen a pretty strong recovery since late spring/early summer.  Oil rigs have risen by 134, or 42%, from the historic low spot in late May, while gas rigs have increased by 35, or 43% over the same period.

While the percentage increases seem high, the actual rig count is still quite low by historical standards.

Wednesday, November 2, 2016

Covey Park on a Buying Spree

Covey Park Energy announced today that it has acquired another chunk of Haynesville Shale acreage. The private equity-backed company bought 139,000 gross (90,000 net) acres in Panola, Nacogdoches and San Augustine Counties, TX and Desoto, Bossier and Sabine Parishes, LA.  Average net production is 35 MMcf/day, so the purchase is clearly more about future value than current income.  Covey Park now owns 321,000 gross (218,000 net) acres in the Haynesville Play, with total proved reserves of 2.5 Tcf.