Has the natural gas industry peaked or is it just holding until conditions change?   What are those conditions that can surge the industry again?  Are we just at a point where the initial positioning for market share, core area locations and infrastructure availability has stabilized the industry for a slow but steady approach for further development?   There just doesn`t seem to be big news anymore!   When might we see another surge...or maybe not?

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LNG buildout is an important factor to watch.NG fits an economic model simular to many other commodities in that volume of sales is more important than price level within the range of production costs. as completion designs increase well production per dollar spent and demand volume increases with LNG and electric power gen. the NG market matures the boom and bust cycle starts to smooth. it is far from over but has become entrenched in our economy. some market thinkers believe injection storage data has less price moving effect than it used to because of confidence in productions ability to deliver through all demand cycles {just in time delivery}, much like electricity. there is a weak link. while the NG industry matures on the demand side, the production side {e&p's} are using venture capital and heavy debt financing and public {stock} to supply their production process. until NG production is in stronger financial hands simular to the oil production side our economy could be in for a shock. we are much more dependent on continued  production while depending on a precarious funding mechanism. consolidation will continue until hopefully companys become self sustaining financially before the next '08 debt crisis.

NG for decades was price volatile.   That kept NG out of the power production and transportation industries.  They can’t plan and function when costs swing like they have in the past.  Coals past appeal was not only price but also stability.  The desire to burn NG now isn’t only the low price but the price has been stable, other wise coal would still be king.  As mineral owners we tend to want the boom bust so we can prosper during the boom but in the long term the continued development will grow with demand but the price and stability is causing the increased demand.  I would like to think the fact that NG is cleaner, fuels the demamd but it is probably 90% because of the money.  The fields will be developed but there is decades of gas in the ground.  The windfall will be for more than one generation but the booms will be smaller and farther apart.  

Your right that NG is plentiful and cheap, as more projects like the cracker plant, more gas power plants, and overseas exports continue to grow, the price and demand will grow. People are still signing leases and getting thousands of dollars per acre signing bonuses, it’s just in select areas, right now competition is nonexistent and that’s why so many leases expired and companies aren’t competing in each other’s area. I don’t know if they got together at one of the gas/oil conferences and decided there was plenty to go around and they wouldn’t bid or compete against each other?? It’s strange how quick most areas died, I think this is a huge opportunity for anyone that missed out on the last boom to jump in and buy some acreage that includes the gas/oil rights and be patient. I have added 5 properties to my portfolio for about 1/3 of what they cost 5 years ago just in the last year or so.

i always felt there was inter company communication, to be PC about it. both you guys have a good handle on the subject. the funding mechanism really is a potential weak link as no operator has closed the circle. majors like Shell, Chevron etc. subsidize their e&p divisions. others like CHK,EQT,Ascent.increase and renigotiate debt. venture cap. funding, mergers and bankruptcies abound. every e&p including private cos. struggle with the same commodity production equation requiring cash infusion from some source. the whole foundation is built on unstable ground and bears watching.

Guys there is no conspiracy. Most operaters simply never make money in the Utica and Marcellus. Only the best operators can make it long term hence why so many outfits have gone bankrupt or selling assets at fire sale prices.

You really need NG to sit above $4 on a long term basis for companies to come in and not only drill out areas but also turn a profit.

You won't have anyone fighting over leases unless your in the sweet spot.

you are right, except i saw the all stop in inter-company bidding here 10 years ago during the mad rush. also may want to review the Aubrey McClendon case, dropped due to a bridge abutment.

I might agree with you other then companies were going crazy leasing everything 6-7 years ago when gas was trading under $2? Back then very little infrastructure, very few big gas projects, and so on. Fast forward today, gas is over $3, several new gas projects being built, and leasing is non existent in most areas?

James. location does make a difference in what activity occurs. i remember ten years going by while a marcellus boom occurred that our area got no interest. then Utica changed all that. while the leasing, except for fill-ins has passed, the developement is now active here. while price is very important, the volume of potential production even more so. just like high production farm ground in the mid-west capable of 400bu./ac corn, high yield shale ground will fetch high bid and first developement. it could be sometime before the shale producers move onto the "rough" ground as yields are not as promising per dollars spent to retrieve the "crop". NG fits a classic commodity pattern. a hamster wheel of more production driving prices down with higher volume production to make up the downward price pressure. lowering costs and increasing total well production performance helps close the e&p financial gap but puts more downward pressure on prices. to make matters worse, service costs such as drilling and completion etc. increase with inflation. this pits classic commodity deflationary trends against inflationary production cost trends. only high production areas and technological innovation will keep the hamster wheel on track.

I live in a dry gas area with pads all around us. I think things will pick back up as prices continue to rise


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