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 May 21, 2022 at 1:36am

Technically savvy people will point out correctly that the Marcellus formation still has a lot of gas outside these sweet spots, and that is true, and it is also true that the marginal areas become economic at $7+ gas.

But barely. Furthermore, the Appalachia field cranks out about 36 bcf/d. It takes quite a few great wells to keep that production flat, and a huge amount of crappy ones.

Sweet spots are becoming exhausted, and a significant amount of drilling activity is now taking place in some pretty marginal areas (like, even, South Buffalo Township in Armstrong County – can you imagine? What are they thinking? What on earth is wrong with these people?) Initial production rates for these marginal areas are a small fraction of the prolific areas – and that is with modern, long-reach wells, each developing miles of reservoir

Permalink Reply by farmgas on May 21, 2022 at 5:28am

Hey Ralph you must have had a bad night.  I`m surprised at your level of criticism & critical view of the future for MS gas drilling.  Our discussion about hedging a while back and how it was limiting gas companies profit who use it are being hampered by higher gas prices now.  Many of these gas companies are drilling nice MS wells and appear to be doing well.  Also notice how much they all tout their thousands of available drilling sites remaining to investors.  Should investors be asking the questions which ones of those marginal areas offer realistic prospects for sustainable gas supply.  Is there a difference in need for higher producing MS wells for the mega vs. smaller private gas companies?  Armstrong County is being developed by generally smaller private gas companies.  Longer laterals do provide for higher producing well production.  Westmoreland County has several smaller private companies drilling nice MS wells along with CNX drilling both MS & Utica wells and all are doing nicely.  What is the future for non-core MS exploration?  Is the expression "go big or go home" in play with the major companies?  Are you suggesting that neither the larger or smaller gas companies can be worthy of investor dollars at lower production & prices?  You have stirred the pot Ralph :)

Permalink Reply by Ralph cramdon on May 21, 2022 at 10:03am

That was a Repost from an article I had read this Morning ,,,, Sorry for the confusion , I should have alerted those reading this of the fact that my previous post was taken from an Energy Article ..... I saw Armstrong County mentioned and thought Farmgas might be interested......... 

Permalink Reply by farmgas on May 21, 2022 at 1:13pm

Ha ha, you got my attention for sure.   But the article does reflect on someone`s  position for future non-core MS gas production.  My comment about how gas companies promote their unused leasing territory with thousands of well potential.  Do investors consider or ask how many of those potential wells are realistic?  Basically core vs. non-core potential.  I`m thinking the comparison might not be so overwhelming to investors.  Any thoughts about my comments posted earlier?

Permalink Reply by Ralph cramdon on May 22, 2022 at 3:09am

Here's a question for you Farmgas ? Do you or anyone you know get 'free' gas from gas wells on your property ? 

Permalink Reply by Lynn mudder on May 22, 2022 at 4:08am

Shallow wells in Ohio give us “free gas” as per the lease. Marcellus wells are too much for private homes, but I know “per your Lease” you can negotiate to be paid for X amount of MCF’s at market value each year. 

Permalink Reply by farmgas on May 22, 2022 at 1:27pm

Yes, I receive free gas from an old shallow gas well lease dating back to the 1960`s.  

It`s my understanding that Marcellus or Utica gas is too high in BTU value and pressure for use. 

Permalink Reply by Ralph cramdon on May 22, 2022 at 11:15pm

Thanks to both Lynn and Farmgas for the responses ..... 

 What kind of maintenance does the "Free Gas ' require ? How much gas do you both use ? What is the life expectancy of the well ? Has the pressure reduced over the years ? Thanks ... I am considering a parcel of land with a well on premises that I would take ownership of ....... 

Permalink Reply by farmgas on May 23, 2022 at 12:12am

Ralph, a landowners use of free gas is not based upon the production of the well.  Gas is provided as long as the well is still in production as the lease requires.  The landowner is responsible for the gas meter, pressure reducing valves etc. at their house.  some method of removing moisture from the gas is necessary at the meter.  Remember raw gas from a well contains moisture which needs to be reduced prior to going into your house.  All of this equipment is at the landowners expense and maintained by the owner.  As this gas is burned inside the house this moisture will be released and could cause corrosion to exposed metal.  Just something to be aware of.  A dehumidifier could be useful if excessive moisture is present.   Old shallow wells could be around for 50+ years as long as they produce gas.  These wells produce water which is costly for a gas company to transport to a treatment site.  Eventually it is a cost vs. profit proposition.  It`s my understanding that some small gas producers could turn over a well to a landowner if they choose to shut it down.  This seems like a potential nightmare to me as a landowner for greater cost & liabilities which could be huge.  Remember the gathering pipeline is connected to a larger pipeline connected to other wells.  You might be able to purchase gas even if your well is plugged.  Usually as pressure declines in the recovery area around a well the gas company uses compressors in the system somewhere to further decrease the pressure in the well pipeline which allows more gas to flow into the well.  Gas is under pressure in the earth which flows to a lower pressure location (the well pipe).  Like pushing a straw into an inflated balloon to remove the air inside the balloon.  When you say take ownership of a well, do you mean actual ownership of the well & all equipment or through a lease?

Permalink Reply by Ralph cramdon on May 23, 2022 at 1:59am

The Well on the parcel I am considering would be owned by me ... "They ' tell me the well would need to be swabbed every 5 years and maintained as you say for water treatments ..... Abandonment costs thy say could be in the $10,000 range as well .... I am gathering info to help me form a decision ......  As usual the Wife says I am crazy .......

Permalink Reply by Lynn mudder on May 23, 2022 at 5:52am

An old well that heats our home has been producing over 75 years. We “blow the drip” periodically to remove moisture from line to prevent freezing in winter.  It does not take much to heat an average home. 

Permalink Reply by Spike's Kin on June 12, 2022 at 9:08am

What was the source of this?

The economics of Marcellus development have been improving with prices skyrocketing, but the strategic reasons could be as simple as there's been nobody drilling conventional wells to hold acreage by production, and 36-mo leases from 2019 boomlet are expiring. Might be that the compressor stations needed to boost conventional well gathering pressures to Utica and Marcellus-era line pressures made it uneconomical at the time the wells now being drilled were in the permitting process.

Everything N of Vandergrift along the Allegheny is potentially the Deep Dry Utica fairway. Might be that the Marcellus wells are placeholders for the stacked pay yet to come.

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