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DAILY GAS FLOW & NG RIGSHaving spent a career in the O&G business & spending more than a decade fighting the GOM treadmill let me differ with a # of earlier stated opinions & what was also raised in the thread, the impossible in the O&G business. Note today, the O&G business comes down to the selling of a commodity controlled by traders not O&G executives. I am ignoring Hedging here because today's Hedge is not attractive (IMHO). In addition, I suspect some will say "it is different in this case, with all the shale plays, etc., etc,". but part of this ongoing thread raised the issue of a frac ban. Not much of a betting man, but depending on an upcoming election ... a ban could happen, as in NY State.
But to my point & the mentioned treadmill. I have borrowed two data point from PHD's weekly Haynesville update (my thanks to PHD). My data extraction is below:
Louisiana Haynesville Wells Status Waiting Non On Date Producing Compl,. Drilling Permitted Total Prod etc 09/15/11 1482 439 94 221 2237 755 09/13/12 2090 205 27 72 2394 304 I reference two of the rows, Producing & Waiting on Completion (to be frac'd), that is the bolded #'s in the two rows. In the last year, ~600 wells have been completed & are Producing. These ~600 wells have come on a rates of 12-18 MMCF/day. These same wells are experiencing depletion rates of 60-75%/year, that is a reduction in daily production from an average of ~15 MMCF/day to ~5 MMCF/day. Thus 600 wells following the same published decline curve on average, each day over the year. As a median #, some time, ~3/1/'13, the current Haynesville production will decline by an additional ~3 BCF/day.
The other pair of well #'s above, Waiting on Production, is dropping by ~14-18 wells/month. These are the completions that are masking the decline, the treadmill. # wise, 15 months for the frac crews to eliminate this inventory, but I believe the market, the traders, will react before the current YOY decline of 3 BCF/day in US production grows to say 5 BCF/day. My reason, the YOY surplus of ~250 BCF will decline to YOY parity by ~ 11/24/'12, which is two months from today.
Lots of variables involved going forward, weather being variable #1. Rigs are slow to come back, that has been my experience. Crews more than evaporate. These rigs are manned by working folks & they find a new job. The last thing I want is a refurbished rig with a new (untrained ?) crew attempting to drill a 15,000' horizontal well & set pipe in a geopressured well.
Throw in E&P Operators which are already setting their 2013 Budgets. The E&P guys are cash constrained, most are 50/50 O&G. Their '13 Budgets will drill liquids where ever they can. Their staffs are working their liquid plays. Drill a poor liquid well early in '13 & the respective staff must find another liquid sweat spot to pursue with the contracted rig.
The Drillers are working on renewing LT rig contracts & signing new contracts. As for new rigs, as has been pointed out ~200 rigs are currently idle-w/o crews & receiving minimum maintenance. But few new rigs will be built, other than to replace older rigs which drill vertical (oil) wells, mostly in the Permian.
Typed much more than I wanted, as usual, AIMHO. To summarize, I trust robry's #'s & analysis. I believe his work & like most on this MB, have followed his excellent work & advise for >10 years. Wish I had recognized 8/'08, but followed robry from 10/'11 & bought back in ~2/'12 so I will ride through 4/'13 unless variable #1, the weather over rides all for '13. In closing, a ~3 BCF/day decline for a year is close enough to 1 TCF, as in less NG in storage, for a trader to notice.
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| Msg # | Subject | Author | Recs | Date Posted |
| 101511 | Re: DAILY GAS FLOW & NG RIGS | billkoz | 7 | 9/24/2012 10:07:25 PM |
| 101519 | Re: DAILY GAS FLOW & NG RIGS | suderle | 7 | 9/25/2012 6:10:25 AM |
| 101532 | Re: DAILY GAS FLOW & NG RIGS | velocity_capital | 8 | 9/25/2012 9:10:58 AM |
