Surging Natural Gas Prices

How are the surging natural gas prices affecting drilling this year, and what about going into 2022?  Are the gas companies taking advantage of these higher prices?  What`s next?

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Permalink Reply by Ralph cramdon on July 31, 2023 at 11:03am

Opinions vary buybacks vs dividends .. Some companies award their peeps  so  many shares that despite the buybacks  share counts continue to grow .. Most Corporate bosses look out for themselves while trying to keep shareholders quiet . Doug Lawler [ spelling ? } former boss of Chessie  was in my opinion one of the worst , paid as much as Exxon Boss and drove CHK into Bankruptcy .. To my surprise H Hamm of Continental hired Doug . 

Buybacks seems to be more effective if the share count is low to begin with . CNX has been more stable than others due to its hedges , but why Invest ? I risk $$$ for a greater return than a few % points .. T bills are @ 5.4% with no risk Bank cd @ 5.5% for three year . Have sold my Gassers [ once again as production is high }  This hot weather also has failed to really move inventory to lower levels .. Shoulder season is not that far away .. 70 % T bills and CD's for now   .. Commercial properties are going bankrupt at an ever increasing rate ,  Dow seems frothy to me . Having experienced a few major corrections over the years , I am doing all I can to get a rate of return above inflation and avoid a trianwreck . Once the herd starts to panic its best to stay away .. 

Permalink Reply by Ralph cramdon on July 31, 2023 at 11:04am

Why does CNX continue to drill at this pace ? They are obligated to fufill those hedges 

Permalink Reply by farmgas on July 31, 2023 at 12:44pm

So when a gas company says they are in a maintenance drilling program it essentially means they are covering production needs to satisfy their hedged obligations?  This doesn`t sound like very aggressive strategy to grow the company though.  Would it be reasonable to assume then that management sits in their war room and the first question is, how much gas do we need to produce this year to meet hedging obligations?  How much gas  will we produce from existing wells allowing for declining production?  Do we have any new customer needs to satisfy?  How many additional wells do we need to TIL this year?  How many wells do we need in a DUC state to meet future needs?  From this answer the yearly strategy is formulated.  Sounds easy enough :)

Permalink Reply by Ralph cramdon on July 31, 2023 at 11:58pm

DUC's have been drilled for different reasons , #1 historically  is to hold the lease . Other times its to build up a region to prep for pipelines , other times is to fufill contract obligations to drillers , and they will hold off completion till prices are right . 

 Appalachian gassers are also constrained by lack of new pipes , so in many cases future production increases are limited . COG drilled much of their best lands at a huge discount due to pipeline constraints and was 'forced' to merge with Cimerex . Maintenance basically  is keeping production flat . Maybe due to lack of new pipes , maybe due to low prices , but still need to fill hedges and or contracted pipe space   .. The Permian gas is the reason for $2.60 gas , as new wells come online the associated gas which  used to be flared is now piped into the system often at a loss at the Waha hub in Texas . Older Permians that now dribble out oil still produce gas as well . 

Permalink Reply by paleface on August 1, 2023 at 5:40am

Ralph, I think most of the drilling today is just to hold leases or they lose it,thats why the gas companys want ten year leases look at all the wells that were temporarily shut down with decent production but they are still drilling CHK. has 4 rigs drilling in Bradford.

Permalink Reply by Ralph cramdon on August 1, 2023 at 12:46pm

Chessie Haynesville is not that profitable at these prices , NE PA is a better option if the pipes are available . I agree that DUCS are used extensively to hold grounds . CHK bet on Haynesville is lower shipper and access to future LNG in the Gulf .

Permalink Reply by farmgas on August 1, 2023 at 3:25pm

Very insightful understanding of how a gas company might choose to manage their drilling plans.  How might these strategies differ between a publicly held company vs. a privately held one? 

Permalink Reply by farmgas on August 2, 2023 at 12:46am

Something has always bothered me about my relationship with our gas company.  Maybe others feel the same about their gas company, too.  Do you feel as I do that we aren`t part of the team, not a part of a plan, not really a valued contributor to the success of the gas company.  When have we received any communication from them recognizing our mutual relationship & interest.  I suppose more recent new lease agreement holders might feel a little different then I do as an old time HBP lease holder.  After all, these new lease holders have had to engage in some serious negotiations to get a quality short term lease with a signing bonus.  As a member of the HBP group it sure would be nice to hear from our gas company.  We all recognize that there aren`t any guarantees in life but don`t they own the rights to our gas!

Permalink Reply by Ralph cramdon on August 2, 2023 at 1:21am

If memory serves me right , your company has tens of thousands of wells that are just dripping out gas .. I would be a bit concerned about their ability to plug future abandoned wells , as this company probably has thousands of them from PA thru Kentucky / Alabama . These legacy wells and their aging pipeline system cost a lot of money to maintain .. I was a shareholder in Carbon Natural Resources and sat in a few Board meetings ..  Carbon  was merged into your outfit .. Carbon promised the world and then failed to deliver .. Carbon CEO spoke of the enormous liabilty your company faces with its legacy wells thru out Appalachia  . I hear your frustration with the lack of communication , they should/could do better . 

Permalink Reply by farmgas on August 2, 2023 at 6:16am

I think you are referring to Diversified Energy.  Actually they do communicate with reports frequently on a general scale.  Their monthly royalty reports are quite informative.  Their gas pricing is very low right now at $1.47/Mcf.  It would be nice if that was a larger number.  The big payday though would be from the gas company that retained the deep drilling rights when the shallow wells were sold to them.  I haven`t had any problems with Diversified Energy.  I see many new permits from the PA DEP to them to plug wells in Central PA.  Time will tell how many they will receive.  It would be nice to be recognized by the major gas company who owns the deep gas rights.

Permalink Reply by Ralph cramdon on August 2, 2023 at 9:37am

Good to hear that Diversified is doing right by you , do you get free gas for heating ? 

Permalink Reply by Ralph cramdon on August 2, 2023 at 12:58am

The long term goal of most Private Companies is to drill enough holes to prove  up the reserves to become attractive enough to be sold .. The history of consolidation in the Industry is deep , the cycles of boom and bust will continue . 

Oil Mans prayer ' Lord please give me one more gusher and I promise not to screw it up this time " 

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