Thursday, May 31, 2012

Comment on Natural Gas: "Skate to Where the Puck is Going to Be"

From a Credit Bubble Stocks correspondent:

"Everyone using $4 gas is looking backwards at prices. The factors that made prices so low – HBP drilling, inertia (not giving up and moving rigs), endless capital from Wall Street, and no winter - are all gone. I have never heard an intelligent argument (or any argument at all for that matter) of why gas should or will be at $4 going forward based on fundamentals. The only “argument” I’ve heard is a vague reference to all of the associated gas produced by oil/liquids plays – but this is coming from people who say there will be too much NGLs and these plays will become uneconomic. The associated gas is also much less than would be produced in the dry gas plays – 1/3 of a Haynesville well and ½ of a good dry Marcellus well. Also, much of it is flared. There are 700 wells flaring their gas in the Eagle Ford right now – this is roughly equivalent to 250 Hayneville core wells. If one rig drills 17 wells per year (which would be very efficient), that is like taking 15 rigs out of the Haynesville and scrapping them . . . that is huge. Same with the Bakken."

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