Notes for Go Marcellus

Some notes from QII conference calls.  Ultra released a fresh Type Curve plate. Highlight is flatter than in the past, which is a slower decline- a good thing. Cabot highlights 20-30 IP rates. Some in the industry claim their geology and technique are not that superior over others nearby, rather they are going to more blow-out strategies which will result in faster declines.  Range – very happy with results in their Lycoming target area which is just SW of Bradford. Southwestern- highlight released a type curve graph of actual wells. The longer lateral/more frac phases well look dynamite. Production is still rising 3-4 months out.  The reply in the conf call was they were doing 10 mmcf/d without extra pressure into the pipeline, a natural choke, and which indicates much higher potential. SWN says they purposely are holding back wells because in their experience and modeling that method results in higher overall production. They have tremendous experience- they are doing 2 Bcf/d in the Fayetteville today vs 0 in 2004.

Chesapeake – not updated yet.

 Bradford County just plain looks super, surrounded by great success and enjoying its own. The SE is stronger than the W and NW, NE our group is waiting on, has anyone seen any numbers they can share?

 Persistent topic. Quality of postings in oil-gas related forums. It doesn’t go away. Recent example is displayed at a PA gas site. Several posters there make broad comments without using any knowledge or checking facts -  like running in the dark. It contributes to misinformation and harms the public readership.

SEC changed the rules and O&G companies now have to choose between two accounting approaches,  "successful efforts" or "full cost". Intricacies are beyond us, one can easily study this via the net. Bottom-line each co will choose based how it impacts their taxing over time.

Southwestern is a prime example. The company was chastised for its huge loss Q2 without any input regarding this issue. Their swap to successful efforts sharply reduced the values of assets in development because of the drop in ngas prices. It is the same company today as before as today. Many companies are subject to the same.  Additionally and maybe helpful to investors the new method includes disclosing reserves classified as probable – greater transparency.

We have no comments on stock potential or values, our only interest is gas performance and performance vs well cost in the sense that that determines viability of methods/geology. 

The Henry Hub natural gas avg for 2011 was $3.15  compared to $4.12 yr prior. SWN took a

 $935.9 million non-cash ceiling test impairment using the new method. SWN’s avg. realized gas price in Q2 2012 was $3.12 down from $4.30 same Q year earlier. Amazingly removing the impairment adjustment SWN would have made 91 million for the quarter even in this low gas times. What helped, was hedging increased its average gas price by $1.36. All hedges are not successful, this one was.

It takes about 10 min of research to uncover that information. It takes zero seconds to just type negative comments. The negative  proves ignorance by the poster. These days with the net, ability/skills in researching seem to become all, we are lucky.

Melissa speaking for the Humphrey Group.