It's getting alittle scary

Ngl prices are dropping every day. I know the panic button was pushed with a warmer then expected forcast. I'm sure it will go back up but what will this do to drilling, if anything.

Will this effect me possibly resigning in january wheny lease expires.

Any thoughts would be appreciated

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Permalink Reply by Elnathan Cory on December 23, 2014 at 3:37pm

I wouldn't worry. Energy will always have value. Nat gas is a winner in the world energy mkt.

Permalink Reply by Dexter Green on December 23, 2014 at 6:12pm

Companies are already staring to cut their 2015 capex. This gets worse before it gets better. If this drags into 3Q15 I wouldn't be surprised to see a lot (think 1/3) of the small cap producers go belly up.  When you take price decline, supply glut, demand slowdown, and impending rate hikes for an operator's borrowing base you have a perfect storm.

Permalink Reply by Frank Walker on December 23, 2014 at 6:13pm

 ". . . . . . what will this do to drilling, if anything."

To answer that for yourself, think of the opposite situation.  Suppose NG were at $6.50 and climbing fast.  I think you already know what THAT would do to drilling!

Course the reverse symmetry has some limits.  To the extent gas companies must fulfill existing contracts to supply NG at a previously agreed upon price, they must drill their leases to obtain the gas they require.  But their impetus to drill beyond their contracted needs, to drill "on spec" if you will, is reduced more and more as prices fall.

Permalink Reply by bo boboski on December 23, 2014 at 11:22pm

ODNR issued 37 horizontal permits last week.  The most I've seen in one week.Most of us was expecting maybe 2 or 3 permits.  It's like the stock market, before you jump on the bandwagon , things could be ready to move in the opposite direction!. Follow the $$$. . I

Permalink Reply by Gary Keeney on December 24, 2014 at 3:12am

I am positive that this is just like Ag commodities, the best cure for low prices is low prices. Cheap gas will make it more economical to  do other thing with gas, like producing electric power. As natural gas is used more in other ways the price will go up. It is a natural cycle in all business.

Permalink Reply by Frank Walker on December 24, 2014 at 3:37am

Agreed.  Absolutely.  Course many of us will be dead by the time that happens!  But what the hey, you're still right!  Heck, death is no bigee.

Permalink Reply by patrick on December 24, 2014 at 3:36am

Eight of those wells are on my pad site. They had been planning my well for over three years. Think some of the slow developement is do to lack of infrastructure 

Permalink Reply by Jack Young on December 24, 2014 at 6:01am

Next year's budgets will all be reduced, including land acquisitions. Better to try to make a deal over the next week and try to get it covered under a 2014 budget.

Permalink Reply by Frank Walker on December 24, 2014 at 11:10am

Jack agree with you regardless I dearly wish things were otherwise.  Personally, I feel very privileged and grateful for these last years.  It's not as if I were special or deserved any of so much good fortune.  It's been a wonderful, blessed run.  But all good things come to an end, whether that end point be permanent or temporary.  Trees do no grow to the sky.  And the thickness of their growth rings in not consistent from year to year.  It's looking like a thin year ahead.

Permalink Reply by Philip Thackray on December 24, 2014 at 11:21am

Here is a good (if sobering) article about the effect of lower crude prices on NGL $s (yes - significant effect) and natural gas.  And forget Henry Hub gas prices.  Here in SW Pa natural gas sold for $2.16 in October.  I'm sure NE Pa is worse.

https://rbnenergy.com/ratio-ga-ga-consequences-of-a-lower-crude-to-...

Phil

Permalink Reply by Jim Litwinowicz on December 24, 2014 at 1:45pm

The Leidy Hub in NE Pa was just below $2/MCF according to last week's EIA report.  Its dropped more this week.

Permalink Reply by jason irvine on December 25, 2014 at 10:21am
Thanks for everyone's responses.

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