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 farmgas on August 2, 2023 at 1:13am

Do these private companies usually have a target buyer when they start-up?  Will a public gas company follow a private companies record or success waiting for the right time to buy them?  Sounds like good strategy by an already successful local public gas company to encourage a private company to spent its money to prove reserves or not. 

Permalink Reply by Ralph cramdon on August 2, 2023 at 3:56am

Many private outfits are actually Wall Street backed outfits looking to eventually sell out . Encap and Yorktown Energy Partners come to mind , along with host of others .. many larger privates have websites and presentations . Why ? To generate interest .

Permalink Reply by farmgas on August 2, 2023 at 9:52am

Yes to your question about free gas.  200,000 Mcf per year.  This continues to be a nice side benefit.  dividing 200,000 by 1,000 Mcf = 200.  If residential gas costs $8/Mcf then this benefit equals $1,600 per year.  More or less depending upon the cost of natural gas or propane.  This is how old leases were drafted over 40-50 years ago.  I`m not certain how they are drafted today.  This is probably a long gone benefit now that shallow gas wells are not being drilled.  Marcellus or Utica is too high in pressure and have too high BTU content now I believe for direct residential use. I may be wrong but this is what I understand about the old days vs the new gas world.

Permalink Reply by Ralph cramdon on August 3, 2023 at 2:08am

You are probably right about the newer wells providing 'free' gas. Is the gas pure enough , or does it need to be filtered and if so how much maintenance is needed for your free gas ?  

Permalink Reply by farmgas on August 6, 2023 at 10:32am

The gas provided from our shallow wells only need to have moisture reduction.  Ours goes into a pipe stand with moisture removing tablets inside.  Its somewhat a crude process but it does remove a lot of moisture.  There are other arrangements available too.   There will be some noticeable corrosion (not much) on some metal surfaces in the house when the gas is burned from this moisture.  The natural gas directly from a shallow well isn`t de-moisturized as well as commercial gas.  The use of this free gas is greatly appreciated.  When Diversified bought these shallow wells the original lease from the previous gas companies carried on.  Our lease began in the late 1960s with Columbia Gas & then Dominion & then CNX Gas.  This free gas provision carried through with each change of ownership.

As far as maintenance for the gas I yearly add new tablets to the stand pipe.  Nothing more.

Permalink Reply by Ralph cramdon on August 7, 2023 at 12:52am

Thanks for the in depth response , Farmgas . I has wondered how the moisture was removed in an economic fashion . Are those wells from 1960 still producing ? 

 I had been approached by some Investors who considered tapping into old wells to run electric generators to produce bitcoins .. I walked from the idea . Firstly I am not a bitcoin type of guy , secondly I was told that those industrial type generators dont do well on that type of gas , thirdly , NY banned bitcoin production from N Gas ..  

Permalink Reply by farmgas on August 7, 2023 at 1:53am

2 wells from 1970-71 & 2 wells from late 1990s, all still producing.  I suspect when maintenance costs exceed produced natural gas Diversified will plug them.  That exact point is not clear yet.  Maintenance cost would include the well tender, occasional tanker truck water removal from collection tanks and occasional  well swabbing & cleaning.  This seems to be the business model for Diversified. 

 

Permalink Reply by Ralph cramdon on August 7, 2023 at 2:25am

50 years of production , impressive .. 50 years of free gas is also impressive .. Any idea what the pressure is of those wells ? Great conversation , thanks .. As a full time energy investor for over 20 years , I learn something everyday . 

Permalink Reply by farmgas on August 7, 2023 at 2:47am

Others might have a story to tell, too, for their wells.  The well pressure for my wells isn`t too clear (old clouded pressure gauges) but I suspect it to be pretty low.  Prior to Diversified ownership when CNX owned the wells and infrastructure (pipelines) CNX installed a small (relative in size) compressor within the system.  This compressor lowered the line pressure from its inlet to all the wells before it.  This lower pipeline pressure allows natural gas to flow more easily into the well bores thus draining gas around the vertical wells.  I was told many years ago utilizing a compressor in this way extends the life of gas wells.  It makes sense to me since gas under higher pressure naturally flows to lower pressure.   Others working in the gas industry might have a clearer explanation of this process.  It seems an inline compressor can serve two functions; one to increase gas pressure to enter a higher pressure pipeline and a second one to assist in draining a gas field.

 

Permalink Reply by Ralph cramdon on August 7, 2023 at 5:02am

I was aware that they need to adjust well pressure to line pressure , you are sharing first hand experience on mature wells .. I thank you once again .. PS . Merril printed a energy essay today .. They like N gas over oil .. Their top N Gas picks are #1 SWN , #2 CHK , EQT and RRC are buys . CNX neutral 

Permalink Reply by farmgas on August 8, 2023 at 5:24am

When will natural gas prices begin to surge again?  LNG shipments plus colder weather isn`t too far off.

Permalink Reply by Ralph cramdon on August 8, 2023 at 2:40pm

First we have to get thru shoulder season .. Future prices next year continue to show higher .. I continue to think the DOW will soften .. I could be wrong as we all place our 'bets' . If the DOW tanks mostly all equities will soften .I own a few pipeliners for dividends and one COAL outfit , and remain roughly 80% in T bills .; First time in 20 plus years not fully engaged .. Shares of SWN and AR have had a pretty good month or two and surprisingly I don't feel 'guilty ' of not catching the 'wave' .  

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