[zeke]

$this->bbcode_second_pass_quote('joeltrout', '[') Before they could not get enough money to pay for the expenses of a well. Now they can... People have known about those fields for decades but very few people leased those lands because they could not make money.

[joeltrout]

$this->bbcode_second_pass_quote('zeke', '')$this->bbcode_second_pass_quote('joeltrout', '[') Before they could not get enough money to pay for the expenses of a well. Now they can... People have known about those fields for decades but very few people leased those lands because they could not make money.

[ROCKMAN]

shortonoil

I didn't catch the "new field" statement but you're correct. I was trying to get wells drilled in this play over 20 years ago. If I dig deep enough I'd probably find the first commercial producer came online in the 50's. It's hot now for just two simple reasons: the price of NG and the desperate need for companies to replace their depleting reserve base. If for some reason gas dropped back to $2 you wouldn't see hardly any drilling in there.

I can't think of a single resource play being drilled now that hasn't been known for the last 30 or 40 years. It's the gas price that has driven the technology advances in these plays which, in turn, make them all the more profitable right now. But tell those new millionaires to hang on to some of that mail box money. Most of these wells will drop production very quickly…like 80%+ in a couple of years

[shortonoil]

Something is not right here! Between 08/28/07 and 07/15/08 the only insider buying is Kerr. Everyone single one of the others are sells. There is no way that Kerr could keep info on a fabulous find boxed in a company that large. I’ve got a feeling that this has more to do with some SWF than NG.

[zeke]

$this->bbcode_second_pass_quote('joeltrout', 'N')o because new technology allows you to produce more which in turn allows lower priced gas to be profitable.

[shortonoil]

$this->bbcode_second_pass_quote('', 'S')omething is not right here! Between 08/28/07 and 07/15/08 the only insider buying is Kerr. Everyone single one of the others are sells. There is no way that Kerr could keep info on a fabulous find boxed in a company that large. I’ve got a feeling that this has more to do with some SWF than NG.

[joeltrout]

$this->bbcode_second_pass_quote('zeke', '
')
OK...clear on the historic high gas prices; I didn't know that.

But now, back to the "newer better tech," if the tech is SO good that it can huck out the gas cheaply at a rate fast enough to offset falling prices due in part to its own efficiency, isn't there some point at which that greater efficiency will become its own undoing?

Unless this new tech does its business for near free, I can't see the price to cost ratio remaining attractive indefinitely.

the nagging concept for me is "this previously too-expensive gas is now profitable to get because of high gas prices."

According to that idea, which I've paraphrased, the profitability of the entire enterprise hinges on some unstated minimum gas price.

As another poster stated here, if the gas price drops to x-dollars per foot, you won't see much drilling. No matter if the new tech is 100% efficient, there are other costs which factor into gas mining, refining, containment, and distribution.

But also, gas is a squirrelly little devil. Gangbusters one day, belly up the next. Guess the players must keep a handy supply of Maalox or Rolaids...

Not trying to be a pest on this, just trying to gain an understanding of the nuts and bolts aspect of this story.

thanks!


zeke

[joeltrout]

$this->bbcode_second_pass_quote('zeke', '
')
According to that idea, which I've paraphrased, the profitability of the entire enterprise hinges on some unstated minimum gas price.

[zeke]

$this->bbcode_second_pass_quote('joeltrout', '
')I hope I am not confusing you.

joeltrout

[Starvid]

$this->bbcode_second_pass_quote('zeke', '')$this->bbcode_second_pass_quote('joeltrout', 'N')o because new technology allows you to produce more which in turn allows lower priced gas to be profitable.

[ROCKMAN]

Historically one of the biggest risks has been price forecasting. Drill today on $9 gas and loose your shirt when it drops to $5 in a couple of years. Drill some crappy wells when oil is $30/bbl and look like a genius 3 years later when it goes to $100/bbl. I’ve been rewarded and slaughtered both ways so many times I can’t count. The big difference today with many of the NG resource plays is that most of the value comes out in a couple of years thus lowering the pricing risk. Which is good because with the increase in leasing/drilling cost today a lot of these plays would dry up at $6 NG? But if it did then costs would go down eventually and the cycle could repeat itself. Not that anyone should shed a tear for us but the profit margins on NEW drilling are getting pretty skinny. It’s only the high probability of success that keeps it going. As I’ve mentioned before, a big push is the requirement to keep expanding the reserve base by the public oils. There are more than a few public oils out there now that would have to keep drilling even if they knew they were swapping a dollar for a dollar. The demand for reserve VOLUME growth by Wall Street right now is so severe there are more than a few CEO’s having restless nights. The traders have long ago adjusted for pricing. Now that pricing is starting to look a little soft they cut the legs out of any public oil which looks like it can’t at least replace last years production.

[joeltrout]

$this->bbcode_second_pass_quote('ROCKMAN', 'H')istorically one of the biggest risks has been price forecasting. Drill today on $9 gas and loose your shirt when it drops to $5 in a couple of years. Drill some crappy wells when oil is $30/bbl and look like a genius 3 years later when it goes to $100/bbl. I’ve been rewarded and slaughtered both ways so many times I can’t count. The big difference today with many of the NG resource plays is that most of the value comes out in a couple of years thus lowering the pricing risk. Which is good because with the increase in leasing/drilling cost today a lot of these plays would dry up at $6 NG? But if it did then costs would go down eventually and the cycle could repeat itself. Not that anyone should shed a tear for us but the profit margins on NEW drilling are getting pretty skinny. It’s only the high probability of success that keeps it going. As I’ve mentioned before, a big push is the requirement to keep expanding the reserve base by the public oils. There are more than a few public oils out there now that would have to keep drilling even if they knew they were swapping a dollar for a dollar. The demand for reserve VOLUME growth by Wall Street right now is so severe there are more than a few CEO’s having restless nights. The traders have long ago adjusted for pricing. Now that pricing is starting to look a little soft they cut the legs out of any public oil which looks like it can’t at least replace last years production.

[Starvid]

$this->bbcode_second_pass_quote('', 'T')he demand for reserve VOLUME growth by Wall Street right now is so severe there are more than a few CEO’s having restless nights.

[joeltrout]

$this->bbcode_second_pass_quote('Starvid', 'T')his is so absurd! As an investor I don't care in the least about the flow of hydrocarbons, I just care about the flow of profit dollars! Especially as we are talking about really inelastic goods!

What do I care if Exxon produce 20 % less in 10 years if oil cost $300 a barrel?!

[Starvid]

$this->bbcode_second_pass_quote('joeltrout', '')$this->bbcode_second_pass_quote('Starvid', 'T')his is so absurd! As an investor I don't care in the least about the flow of hydrocarbons, I just care about the flow of profit dollars! Especially as we are talking about really inelastic goods!

What do I care if Exxon produce 20 % less in 10 years if oil cost $300 a barrel?!

[zeke]

$this->bbcode_second_pass_quote('Starvid', 'T')he only way this wouldn't work is if a massive global depression crashes the price of oil.

Remember, oil demand is very inelastic.

[joeltrout]

$this->bbcode_second_pass_quote('Starvid', 'I')f Exxon produce 80 % of the boe they produce now prices won't stay at $120. Now, I'm not really talking about Exxon as such as they control such a small part of the global market, but add all the IOC's and you end up around 25 %(?) of all production (and maybe 10 % of reserves). If these guys lose large amounts of production the NOC's won't be able to compensate that, and certainly not while they are supplying increasing amounts to Asia and the oil states themselves. And so prices go up. The only way this wouldn't work is if a massive global depression crashes the price of oil.

Remember, oil demand is very inelastic.

[Starvid]

$this->bbcode_second_pass_quote('zeke', '')$this->bbcode_second_pass_quote('Starvid', 'T')he only way this wouldn't work is if a massive global depression crashes the price of oil.

Remember, oil demand is very inelastic.

[Starvid]

$this->bbcode_second_pass_quote('joeltrout', '
')Keep in mind that Exxon is a global company and has been kicked out of many areas such as the Middle East, Venezula, etc...

What happens if they get kicked out of Africa and Russia because those countries nationalize the oil fields and give Exxon the finger. Then Exxon stock is almost worthless.

joeltrout

$this->bbcode_second_pass_quote('zeke', '')$this->bbcode_second_pass_quote('OilFinder2', 'B')ut energy companies and experts say it is large, possibly the largest in the lower 48 states, with an estimated 250 trillion cubic feet of recoverable gas. (Last year, the United States consumed 23 trillion feet.).