Flight to Oil

I would like some comments about many of the O&G Companies' recent strategies to raise and allocate capital expenditures AWAY from NG and into shale oil plays like the Niobrara (sp?). 

Specifically how does this strategy affect short and long term Marcellus production? Naturally the depressed price of NG versus the potential profits of $90-125/b oil has to be a huge factor.

I also read recently that there is a general shortage or lack of available fracking equipment/companies. Anyone know if this is accurate?

Are they just "making hay" right now? Meaning: greater profits in oil right now?

Will they just drill and HBP until a price rebound?

 

Any feedback is appreciated. Thanks 

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Permalink Reply by Mike Knapp on January 11, 2011 at 9:38am

It's all about the price of oil vs. the price of gas.   Gas companies would have stopped drilling a long time ago to keep from depressing the price so much but they have to drill to keep leases from expiring.   Companies putting more money into oil right now is a godsend for the NG industry.  

 

-Mike

Permalink Reply by mark ayers on January 11, 2011 at 12:39pm
When comparing the Bakken/Three Forks to Barnett, Haynesville, Fayetteville, and the Marcellus shale, there is a much different dynamic because the Bakken/Three Forks are providing up to 96% oil the margins are much better. As of 12/10, oil was trading at $92 which provided a 6 to 1 conversion when comparing oil to natural gas. The Bakken/Three Forks margins are $76 as compared to $19 of other natural gas orientated shale plays. This difference in margins should persist for some time as the over abundance of natural gas is drilled from other formations.http://seekingalpha.com/article/245689-brigham-outstanding-drilling...

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