Commodity Price

Commodity Price | Crude Oil | Industrywide Issues

Will Oil Hit $60 by Year’s End? Shale Giant Harold Hamm Says Yes
January 15, 2016January 15, 2016

The price of natural gas is somewhat tied to the price of oil. They don’t track exactly together, but we think it’s a fair statement to say as goes the price of oil so goes natgas. One of the pioneers of drilling for oil and gas in shale deposits is Harold Hamm, CEO of Continental Resources. What Hamm thinks and says about the price of oil is of keen interest to everyone. He is, perhaps, the closest thing to an oracle our industry has. Hamm was interviewed on Wednesday and asked where he thinks the price of oil is headed in 2016. This is what he said…
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Commodity Price | Crude Oil | Industrywide Issues

Pulling the Curtain Back on EIA 2016/2017 Oil Price Predicition
January 14, 2016January 14, 2016

Yesterday MDN brought you the latest thinking/preview for where the U.S. Energy Information Administration (EIA) believes energy production and prices will go over the next 12-24 months, something called the Short-Term Energy Outlook (see EIA’s STEO Predicts NatGas Price Constant This Year, Up Next Year). Today we bring you a deeper dive into the EIA’s predictions with respect to the price of crude oil. The EIA forecasts Brent crude oil prices will average $40 per barrel in 2016 and $50/barrel in 2017. West Texas Intermediate (WTI) crude oil prices are predicted to be $38/barrel in 2016 and $47/barrel in 2017. Here’s a bit more background on how the EIA calculates its numbers for crude oil price…
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Commodity Price | Crude Oil | Electrical Generation | Industrywide Issues | Research

EIA’s STEO Predicts NatGas Price Constant This Year, Up Next Year
January 13, 2016January 13, 2016

Yesterday the U.S. Energy Information Administration (EIA) released their monthly Short-Term Energy Outlook (STEO) report. It contains some interesting predictions. Among them: EIA predicts the average Henry Hub price for natural gas in 2016, when the year is completed, will end up being $2.65 per million British thermal units (MMBtu). The average price for 2015 at the Henry Hub was $2.63/MMBtu–so the EIA believes this year will be virtually unchanged from last year, when the final chapter is written. The EIA goes on to predict the average HH price in 2017 will be $3.22/MMBtu. Another interesting prediction in this month’s STEO: EIA says natural gas’ share of the electric generation pie will actually fall–with natgas generating 33% of all electricity in 2015 to 31% in 2017. Why? More renewable sources coming online…
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CNG/LNG | Commodity Price | Crude Oil | Hydraulic Fracturing | Industrywide Issues | NGLs | Pipelines | Regulation

The Smartest Man in the Oil (& Gas) Patch: Rusty Braziel
January 13, 2016January 13, 2016

In 2015 MDN editor Jim Willis had the pleasure of sitting in on a one-day “State of the Energy Markets” presentation by RBN Energy, held in New York City. RBN, for those who don’t know, was founded by the former co-founder of Bentek Energy, Rusty Braziel. Rusty is a legend in the industry. He was there presenting, along with a few other seasoned pros that work for him at RBN. Great session. Jim learned a lot about the energy markets and how they work. And why they work the way they do. Rusty was a guest on Jim Cramer’s Mad Money program (on CNBC) last Friday. We have the video below. Jimmy Cramer calls Rusty “the smartest man on the oil patch” and the only person he consults with when it comes to the price of oil and gas and what’s happening. It’s high praise coming from Cramer. And well deserved. If you want to know why the price of oil (and gas) is doing what it’s doing, give this a watch and read…
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Commodity Price | Economic Impact | Industrywide Issues

Debate Rages: How Many Shale Drillers will go Bankrupt?
January 13, 2016January 13, 2016

Fadel Gheit, senior oil and gas analyst at Oppenheimer & Co., speculated on CNBC on Monday that half of all U.S. shale oil producers could go bankrupt before the price of oil reaches equilibrium. For Gheit, equilibrium price will be somewhere around $60-$70 per barrel. But, he says, it will take a few years to get there. His thesis is that in the meantime oil and gas companies are spending money out the wazoo and cannot sustain it and a good many of them (the smaller ones anyway) will go under. We compare his comments (below) with what Rusty Braziel recently said to Jim Cramer…
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Commodity Price | Crude Oil | Industrywide Issues

Historic Average Price of Oil is $30/Barrel – Who Knew?
January 12, 2016January 12, 2016

Here’s a bombshell: Did you know that throughout its existence as an energy source that oil has sold at an average of $30 per barrel, adjusted for inflation? There have been a few periods of price spikes, but overall, on average, oil has always sold for around $30/barrel. No, we didn’t know that either. But that’s the assertion of Michael Lynch, president of Strategic Energy & Economic Research Inc. He’s been an economist/researcher in the oil industry for nearly 40 years, so he should know. We often highlight articles by Lynch in our daily “best of the rest” listing of stories you may be interested in reading. Our favorite Pittsburgh Post-Gazette reporter, Anya Litvak, recently spoke to Lynch. Here’s a portion of that enlightening interview…
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Commodity Price | Industrywide Issues | Ohio | Pipelines | Processing Plants | Statewide OH

Brutal Honesty from OOGA: ‘No Way to Sugar Coat’ the Bad News
January 12, 2016January 12, 2016

In December we highlighted comments by Shawn Bennett, executive vice president of the Ohio Oil and Gas Association (OOGA), in which he predicts 2016 for Ohio’s oil and gas drillers won’t be pretty (see OOGA Tells Ohio to “Sit Tight” – 2016 Won’t be Pretty). Must be Bennett is on a truth-telling tour. Last week he addressed the first Guernsey Energy Coalition meeting of the year last week in Cambridge, OH. He told the audience he wasn’t going to sugar coat the bad news, and he didn’t…
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Commodity Price | Industrywide Issues | Pipelines

New Pipelines in the Marcellus Dramatically Improved Prices in 2H15
January 11, 2016January 11, 2016

What a difference a few pipelines can make. Last week the U.S. Energy Information Administration (EIA) issued their Natural Gas Weekly report (excellent report, great overview of the industry at large). One of the brief articles included in last week’s EIA update was story about the “basis differentials” for the Marcellus, and how they’ve narrowed. Basis differential means “how much does the gas trading at a given location trade above or below the standard Henry Hub price.” For example, last summer gas trading at Transco’s Leidy Hub in the Marcellus was trading for $1.65 million British Thermal Units (MMBtus) BELOW the Henry Hub price. In December, the gap had narrowed and Transco Leidy Hub prices were, on average, trading around 89 cents/MMBtu below the Henry Hub price. That’s a vast improvement in just six months. Why the narrowing in trade price? New pipelines came online in the latter half of last year, carting Marcellus Shale gas to new markets. More demand (i.e. new markets) equals a bump up in price…
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Commodity Price | Industrywide Issues | Research

2015 NatGas Prices Traded at Lowest Level Since 1999
January 6, 2016January 6, 2016

Anecdotally we know that the price of natural gas in the U.S. as bought and sold along hundreds of locations on major pipelines was low in 2015. At least it seemed low. Story after story told us it was low. The price of gas as traded at the Henry Hub delivery point in southern Louisiana is used as a proxy for “the price” of natgas nationally–and it was low. But what does the actual data tell us? According to our favorite government agency, the U.S. Energy Information Administration (EIA), the data confirms what everyone already “felt” was the case: the price of natgas in 2015 traded at its lowest level since 1999. Here’s the proof…
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Antero Resources | Commodity Price | Energy Companies | Industrywide Issues

How Antero Resources Converted an Ugly Duckling into a SWAN
January 5, 2016January 5, 2016

Antero Resources is perhaps the largest driller completely focused on the Marcellus/Utica (by acreage). They are certainly one of the most important drillers in the northeast. And bucking the trend of almost all of their competitors, they somehow manage to operate in the black (see Antero Resources 3Q15: Bucks the Trend, $237M in the Black!). What’s Antero’s secret to making money in arguably the worst time for our industry in a generation? In a word, it’s hedging. Somehow Antero crafts financial deals a year or more in advance to sell whatever gas they produce for prices much higher than others–at prices that mean the company continues to make a profit. Most energy companies these days are keeping the people who run those companies, AND their investors, up at night. A company like Antero comes as close to any as a SWAN–a “Sleep Well At Night” energy company. An interesting article on the Seeking Alpha website gives us background and clues as to how Antero has been able to convert itself from an ugly duckling into a SWAN…
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Commodity Price | Industrywide Issues | Pennsylvania | Statewide PA

Why Do Marcellus Drillers Continue Drilling with Prices in the Basement?
December 28, 2015December 28, 2015

If a company that makes a product can no longer make that product at a profit, why would it keep making that product? Put another way, if Marcellus drillers can’t make money by selling natural gas for 75 cents per thousand cubic feet (and they can’t), why would they keep drilling new wells? And why would they keep pumping gas from existing wells? That’s the question asked–and answered–by an excellent Oil & Gas 360 article…
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Commodity Price | Industrywide Issues | Ohio | Pennsylvania | Statewide OH | Statewide PA | Statewide WV | West Virginia

2016: Fewer Rigs Operating, Less Gas Flowing in Marcellus/Utica
December 28, 2015December 28, 2015

This is the time of year when prognosticators come out of their prognostication holes to prognosticate about the rapidly-approaching New Year. Some of those predictions involve the Marcellus/Utica industry and what we may see coming our way in 2016. And what might we see? Most believe we’ll see cut-backs in drilling–most companies have announced such plans. However, one thing we won’t see is all drilling stop. As we highlight in a companion story today (see Why Do Marcellus Drillers Continue Drilling with Prices in the Basement?), drillers will keep drilling in the Marcellus in 2016. Perhaps not as much as they drilled in 2015–but make no mistake, the industry is not finished. So if they will continue to drill, even though prices are in the basement, where will they get the money to do so? That’s the focus of this particular piece of prognostication…
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Commodity Price | Crude Oil | Industrywide Issues | Research

OPEC’s 2015 World Oil Outlook Paints a Rosy Price Picture
December 28, 2015December 28, 2015

There is nobody on the planet who watches the oil market more closely than OPEC–the Organization of the Petroleum Exporting Countries. OPEC is made up largely of tinpot Middle Eastern dictatorships who keep their general populations pacified by sharing some of the riches from oil sales with them via socialist government programs. While the leaders of OPEC countries often lie to each other and lie to the world, one thing they typically don’t lie about is the oil industry, where it’s headed–and their own very vital role in it. Last week OPEC released its annual 2015 World Oil Outlook (WOO, full copy below), which outlines OPEC’s expectations for the global energy sector–in particular oil and gas–from now until 2040. One admission in the 2015 WOO: US oil production from shale plays will be “more robust” than OPEC had predicted as recently as last year. Another prediction in this year’s WOO: oil will hit $70 per barrel by 2020 (four short years from now) and climb to $95 per barrel by 2040 (15 short years from now). There are plenty of other interesting predictions and observations in this year’s WOO…
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Commodity Price | Industrywide Issues

Price of Marcellus NatGas at Record Lows – $0.59/Mcf @ Dominion S
December 23, 2015December 23, 2015

The price that physical natural gas is selling for–in December (winter!) no less–is enough to make grown men cry. And it does. While natgas prices for gas trading at the Henry Hub delivery point in southern Louisiana sold for an average of $1.89/Mcf yesterday, the price for gas trading at Dominion South (in the Marcellus Shale) was just 59 cents per Mcf–an historic low. Weather certainly has a lot to do with that price–but so does an overabundance of supply and lack of pipelines to carry that supply to other markets…
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Commodity Price | Coterra Energy (Cabot O&G) | Energy Companies | Industrywide Issues | Southwestern Energy

Problem: Some Marcellus/Utica Drillers Entering 2016 Not Hedged
December 22, 2015December 22, 2015

A recent report issued by Standard & Poor’s Ratings Services sounds an alarm over the issue of hedging for 2016–in particular for independent producers in the Marcellus and Utica Shale region. What’s hedging and why do we care? Drillers (and others who buy and sell natural gas) often engage in a practice called hedging, which is, in a simplified explanation, a contract to sell (or buy) a commodity like natural gas at an agreed-on price at a future date. There is an element of risk in hedging. From a driller’s perspective, if you strike an agreement to sell your gas in the future and the price goes a lot higher, you have to sell your gas at the lower price you agreed to. That’s the down side. But if the price goes a lot lower in the future, you’ve covered your derriere by locking in a higher price for the gas you produce–making money when your competitors aren’t. Drillers and others who buy and sell gas use hedging as a way to guard against price swings. It’s a “risk management” function in a company. Unfortunately most of the hedges previously arranged more than a year ago are now expiring. And nobody but nobody is willing to strike a contract right now for $3 or $4/Mcf gas a year or more down the road. No one believes the price will recover that much. Which means many drillers (in our neck of the woods) are entering 2016 without their production being hedged–a very scary proposition…
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CNG/LNG | Commodity Price | Exporting | Industrywide Issues

Platts Says LNG Heading to Japan & Korea Fetching $7.40/Mcf
December 18, 2015December 18, 2015

Platts Japan/Korea Marker (JKM) LNG service issued an update yesterday that caught our eye. The JKM service says that LNG (liquefied natural gas) for delivery to northeast Asia (Japan and Korea) will average $7.397 per million British thermal units (MMBtu) for January delivery. Converted, that’s $7.40/Mcf (thousand cubic feet). That number is down 26.5% year-over-year. But hey, if our drillers were getting $7.40/Mcf for their gas? We’d be singing, “We’re in the money…” The problem is, of course, we don’t (yet) export our natural gas via LNG to any other countries. That’s about to change in January when Cheniere Energy’s Sabine Pass LNG facility begins shipping (see Genscape: Sabine Pass LNG Export Began Accepting Natgas on Dec 10). It’s not likely any gas will head to Asia from our shores until the Cove Point LNG export facility in Maryland is completed in the next few years. Until then, we can only watch and hope that some day our gas will be sold for $7+ per Mcf…
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