Comment

Comment by Joseph-Ohio on June 8, 2013 at 9:37am

Also, the more time that passes the more I see that simply burning Oil as a fuel (in any of it's natural or refined forms) while considering the fact that there's all of this Natural Gas about isn't very bright - but instead most stupid.

Thinking that mass conversion to Natural Gas as a Fuel would be the smartest thing we can do.

Save the Oil for Strategic / Defense Use only.

If we have to we should subsidize conversion as a Strategic matter of National Defense.

Pickens said that if we let this opportunity to become energy independent as a nation slip by us we should also be considered the most stupid generation that ever took charge.

He's 100% right.

All IMHO

Comment by Joseph-Ohio on June 8, 2013 at 9:25am

@ Jack Young:

Very true.

It's also impractical to even attempt to list all of the differences between costs of Natural Gas vs. Oil on this little Comment Page.

A person could write a book and still not cover it all.

I only struck two very obvious examples of the way things seem to me to be now / today.

Personally, I can't see it changing / reversing here either.

Also, if all you're doing is burning a commodity as a fuel Natural Gas would and should always remain less to purchase than Oil.

IMHO

 

Comment by Jack Young on June 8, 2013 at 9:17am

Market prices don't reflect producer costs, only the immediate balance between supply and demand. The ratio of oil to gas prices has changed on numerous occasions, and is different in different parts of the world. Oil doesn't always cost more to recover than gas either - this varies by field. You can't assume that natural gas will always be cheaper than oil, although that's certainly the case now. Also, you're comparing welhead prices, not consumer prices, and that's the relationship that drives the market. There is more than btus to compare - that much is true.

Comment by Joseph-Ohio on June 8, 2013 at 9:07am

There's more than BTU to BTU to compare.

Oil is used for a lot more things than Natural Gas.

Oil costs more to recover than Natural Gas.

That's why Oil is worth more and is more expensive than natural gas.

$22.00 per 5500 c.f. vs. $93.00 per barrel.

That yardstick should always keep Natural Gas less expensive to purchase than Oil.

Comment by RoughRice on June 8, 2013 at 8:56am

Samuel, I have certainly seen 5,500 c.f. used to convert natural gas (methane) to a barrel of oil.  I have 6,000 c.f. used, as in the following from “NGL 101- The Basics”: 

“Barrel of Oil Equivalent – A method of equating oil, gas and natural gas liquids. Natural or ‘Dry Gas’ (i.e. methane) is converted to oil based on its relative energy content at the rate of six Mcf of gas to one barrel of oil. NGLs (i.e. ethane, butane, isobutane, pentanes, natural gasoline, condensates) are converted based upon volume: one barrel of natural gas liquids equals one barrel of oil.”  

Rather than responding to RJS about the basis of his royalty check, I probably should have kept my mouth (or keyboard) shut, because we are missing a lot of facts.  For starters, I sure would love to see the “royalty calculation clause” from his lease, unless he is prohibited from disclosure by a “confidentiality agreement”.  Maybe RJS gets two checks, one for oil and NGLs and another for natural gas?  Otherwise you are right, it seems very low.

Comment by Samuel J. Orr on June 8, 2013 at 2:41am

5500 cubic feet equals 1 boe. If  gas is $4 per mcf, then 5500 cubic feet  of gas would be worth $22. If a well was producing oil, a landowner would  be very unhappy to be paid a royalty based upon his royalty percentage multiplied by  $22 / barrel for the portion of the well's production that was actually oil. (Perhaps Rough Rice can comment if I have made a mistake in my calculations.) 

 

Comment by sldouglass on June 7, 2013 at 3:26pm

It sounds like Oliver Perry is right about the shallow wells which means there is even less going on in the shales.

Still there is a revolution going on.  See:

http://finance.yahoo.com/news/start-engines-natgas-coming-tank-1327...

Though the underground resources are vast, eventually the drillers will get around to properties - over the next ____ years.

I suppose royalties will be decided based upon something like "barrel of oil equivalent" - whatever that is.  I hope it is based on the higher prices for which the several constituents of the wet gas are sold [propane, butane ethane etc.] but maybe the operators will just pick a number. Has anyone managed to get a detailed analysis of how the numbers will be determined - or do we care.

Comment by RoughRice on June 7, 2013 at 10:03am

The royalty is probably calculated based on "barrel-of-oil-equivalent" rather than breaking out each constituent part of the oil/gas stream. Your lease should actually say exactly how royalty calculated.

Comment by Oliver Perry on June 7, 2013 at 9:58am

Just out of curiosity, on Monday I will obtain the plats for a couple of those vertical wells permitted in Crawford County this year to see what formation is targeted. I will post them here when I get them.

Comment by RJS on June 7, 2013 at 9:52am

We got our first quarter royalty check for 2013 and it has sales from the Lippert well.  It shows 116.13 barrels of oil selling at $84.964 per barrel.  No gas or other sales listed.

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