Commodity Price

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    How the Marcellus & Utica Affects the Price of Natgas

    A blogger writing on the Seeking Alpha investor’s website recently published a lengthy (and excellent) article listing 12 reasons why he believes the current price level of $6+ per thousand cubic feet (Mcf) for natural gas won’t last long. The article’s aim is to warn investors not to get caught up in an irrational exuberance and belief that higher gas prices are here to stay. As we’ve commented before, the commodity price for natural gas is of concern to everyone–from landowners to drillers to midstreamers to traders and buyers–the entire gas ecosystem.

    The reason we highlight the SA article is two-fold: One is he makes some great points about what influences the price of gas, and second, two of his points concern the Marcellus and Utica…
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    Which Way Do You Flow? The Price of Gas, the Marcellus & Canada

    What’s the long-term prognosis for the commodity price of natural gas? Depends on who you ask–but overall, “the market” seems to be saying even amidst one of the coldest winters on record in decades, the longer term trend will be low to moderate prices for methane/natural gas. Industry publication Oil and Gas Investments Bulletin issued one of their analysis stories on the press release wire (a clever marketing move that we appreciate). The story delves into the issue of gas prices and its relationship to Canadian exports/imports. One of the major components of the story (full copy below) is an analysis by investment firm Raymond James.

    Guess which shale play Raymond James spends a good deal of time examining? The Marcellus, of course–which is why we found this particular story about gas prices intriguing. Another reason the story is intriguing is because it reveals that Canada, which has long been the #1 source of natural gas imported into the U.S., has seen their gas flows into the U.S. drop by 50% in the past six years. And now, Marcellus gas is starting to flow the direction, into Canada…
    Read More “Which Way Do You Flow? The Price of Gas, the Marcellus & Canada”

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    Blue State Blues: 6 New England States Want New Natgas Pipeline

    Wonders never cease. The governors of six New England states (5 Democrat governors, 1 Republican governor) have sent a letter, or more properly the heads of their state utility commissions have sent a letter, to ISO New England (the regional cooperative transmission organization), requesting that a new natural gas pipeline be built to get more Marcellus Shale gas into New England. Oh, and they want to charge electric customers to get it built. Why? Not enough pipeline capacity now. Electric generating plants are using more and more natural gas to produce electricity. Not enough supply of natural gas in New England means those generators are paying nosebleed rates to produce electricity, and consequently electric rate payers are paying out the nose to cover the cost. Eventually those rate payers will toss their overlords out of office is something isn’t done–so by golly they’re doing something.

    Even the fossil-fuel hating, tree hugging anti-frackers in New England have hit the brick wall of reality: so-called renewable sources of electricity can’t and won’t (for the foreseeable future) provide enough electricity to meet our needs. The remarkable request letter (embedded below) doesn’t specify how or where the pipeline should go, just that they need it and they need it in place by winter of 2017. Of course, that doesn’t stop some of the nuttier anti-drilling organizations from opposing the idea…
    Read More “Blue State Blues: 6 New England States Want New Natgas Pipeline”

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    IHS Research Predicts Gas Price will Stay at $4-$5/Mcf Until 2035

    An interesting new report is out from IHS. Researchers with IHS predict that the price of natural gas, because of the flood of new shale gas coming into the market, will stay somewhere between $4-$5 per thousand cubic feet (Mcf) at the benchmark Henry Hub for the long-term–like until 2035, at least.

    The report, titled “Fueling the Future with Natural Gas: Bringing It Home” (25-page executive summary embedded below) says shale gas can be profitably produced at $4/Mcf or less. One of many conclusions from their research: “…the North American natural gas resource base can accommodate significant increases in demand without requiring a significantly higher price to elicit new supply.” Translation: A LOT more shale drilling just ahead, even with relatively “low” prices. Here’s another fascinating conclusion from the study…
    Read More “IHS Research Predicts Gas Price will Stay at $4-$5/Mcf Until 2035”

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    The Wild Ride for NatGas Prices in the Northeast

    The price that utility companies and large users of natural gas pay at the pipeline is a lot higher than the price drillers sell it for. Like, multiples higher. However, the pipeline sale price does influence how much drillers will receive. Natural gas is a commodity, and like all commodity markets, the price of gas depends on supply and demand. Since gas is sold at hundreds of market points along transmission pipelines across the country, there are hundreds of different, tiny “markets” of supply and demand.

    Platts issued an interesting press release/article yesterday about the yo-yoing price of gas right now due to the extreme cold in the northeast and Midwest. While some Marcellus gas is sold by drillers for under $3 per thousand cubic feet (or Mcf, which is the same unit as one million Btus, or MMBtu), some of that same gas is being purchased down the pipeline for upward of $60 per Mcf (or MMBtu)! The current situation is an extreme price spike and it won’t last, but it illustrates just how widely prices can swing in the natgas market…
    Read More “The Wild Ride for NatGas Prices in the Northeast”

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    RBN Energy’s 2014 Predictions & the Marcellus Connection

    RBN Energy, headed by energy industry luminary Rusty Braziel (formerly an executive with Bentek and veteran of several large oil and gas companies), recently proffered its Top Ten Energy Prognostications for 2014. RBN is based in Houston, but a number of this year’s predictions from RBN are either directly or indirectly related to the Marcellus and Utica Shale, which tells you the stunning impact our northeast energy market is having on the world energy market.

    Below is the abbreviated list of RBN’s “top 10” predictions for 2014–the Chinese Year of the Horse. Bear in mind what Rusty says, even as a prognostication, most (including MDN) believe as the gospel truth…
    Read More “RBN Energy’s 2014 Predictions & the Marcellus Connection”

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    MDN’s Top 10 Most Important Stories of 2013 – Our View

    Top 10Yes it’s trite and certainly overdone, but hey, it’s the last day of 2013 and a slow news day. So MDN editor Jim Willis thought he would put together a list of what he considered to be the top 10 Marcellus and Utica Shale stories from 2013. It’s a look into what we believe, based on your input and feedback, to be the most relevant and important stories from this year. Enjoy!…
    Read More “MDN’s Top 10 Most Important Stories of 2013 – Our View”

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    NYC’s Energy Infrastructure “Transformed,” Boston’s is Not – Why?

    We find it amusing that mainstream media is so narcissistic and navel-gazing that if a story doesn’t originate from NYC/DC media axis, it’s as if the story never existed. Case in point: The Atlantic magazine trumpets “no one noticed” that last month a whole lot more natural gas started flowing to New York City because of a new $1.2 billion pipeline from Spectra Energy connecting NJ to NY. Uh, excuse us Atlantic, but MDN noticed. We’ve been covering this story for the past two years! We told readers back on Oct. 21 that Spectra was opening the valves on an additional 800 million cubic feet of mostly cheap Marcellus Shale gas per day (see Spectra NJ-NY Marcellus Gas Pipeline Goes Online Nov. 1).

    It may take a few months, but we’re glad to see some mainstream media outlets finally, grudgingly, report the good news. However, there are other stories the media continues to ignore, like why Boston will continue to pay high prices for their natural gas even though there’s plenty of cheap gas to be had. There’s a pretty simple explanation…
    Read More “NYC’s Energy Infrastructure “Transformed,” Boston’s is Not – Why?”

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    Big News: Bloomberg Writes Positive Marcellus Shale Article!

    Whenever we start reading a Bloomberg article about the Marcellus Shale, shale gas drilling in general, or fracking, we just know how skewed to the anti-drilling side of the ledger the story will be. So imagine our surprise when we read an article that actually reports (gasp!) the truth about the Marcellus Shale. Even though Bloomberg usually tells us the low price of natural gas can’t last, the whole shale gas thing is a house of cards waiting to collapse, drillers are trying to hoodwink investors, blah blah blah–this time even Bloomberg can’t ignore the fact that natural gas being piped into New York City is selling below the price of the benchmark Henry Hub in Louisiana–and likely will for years to come. Thanks to the Marcellus.

    The Bloomberg article does a good job of giving the big picture with respect to gas prices and how drilling has become more efficient, how infrastructure (pipelines) are helping to get all that gas to market (abundance of supply equals lower prices), and predicting what’s coming next. At the end of the article is an obligatory few sentences from anti-drillers about how shale drilling will poison all of our water and make farms uninhabitable. Well, it is Bloomberg after all. But on balance, this is a good article and worth your time to read. The article begins this way…
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    Cabot O&G: Marcellus Cost Structure Goes Through the…Floor!

    Cabot Oil & Gas continues to impress and astonish the drilling industry. MDN has written many times before about Cabot’s ability to spin “gold” (profits) from “hay” (low cost price environment). Cabot recently presented at a pair of “global energy conferences” arranged by investment firms Jeffries & Co. and Bank of America Merrill Lynch. We have the slide deck from each (which is pretty much identical) and we’ve embedded it below. You’ll want to review it if you have an interest in the Marcellus Shale.

    One of the startling pieces of information we glean from it: Starting in 2009 Cabot’s cost to drill and produce gas was $2.47 per thousand cubic feet (Mcf). By 2013, that number had dropped to an average $1.37/Mcf. Next year, in 2014, Cabot says their Marcellus per unit cash cost, the cost of drilling and producing, will be around…
    Read More “Cabot O&G: Marcellus Cost Structure Goes Through the…Floor!”

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    How Low Can You Go? Northeast NatGas Prices Dip Below Henry Hub

    In what increasingly appears to be a game of limbo, or “how low can you go,” natural gas prices in the northeastern part of the U.S. keep going down. In a reversal of past trends, many of the market points in the northeast are beginning to slip below the benchmark Henry Hub market point price in Louisiana.

    What does it mean? It means residents in one of the most populous areas of the country, the northeastern U.S., are now paying less for natural gas than they did just a few years ago because the gas they are using now is produced nearby in the Marcellus and increasingly in the Utica Shale region. There is so much locally produced shale gas, it’s causing big changes in the natgas marketplace, as noted by the U.S. Energy Information Administration (EIA)…
    Read More “How Low Can You Go? Northeast NatGas Prices Dip Below Henry Hub”

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    The Cabot O&G Marcellus Rocketship – To the Moon!

    rocket to the moonCabot Oil & Gas, one of our favorite Marcellus drillers, continues to amaze and astound just about everyone. Last Friday (a week ago) the company issued a new “guidance” or “this is our best, educated guess” as to how much natural gas production the company will end up producing for 2013, and how much they believe it will grow in 2014. Given Cabot is already the number one natural gas producer in PA and the first member of what MDN calls the “billion cubic feet per day” club (see Who’s a Member of the Marcellus “1 Bcf/d” Club?), it’s amazing that in 2014 they predict production will be up another 30-50% over this year. Wow!

    Something just as startling and no doubt the envy of all their competitors, Cabot CEO Dan Dinges tips their hand as to what the breakeven price is at which the company starts to make money. It’s a LOT lower than even we thought is was…
    Read More “The Cabot O&G Marcellus Rocketship – To the Moon!”

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    Potential New Market for Marcellus/Utica Gas: LNG for Use in U.S.

    Liquefied natural gas (LNG) isn’t just for exporting to other countries. LNG is increasingly used right here at home, in the U.S. GDF SUEZ Gas has provided LNG to the northeastern U.S. for the past 40 years for use in ships, railroad locomotives, long-haul trucks, and heating/power generation. Earlier this week GDF SUEZ announced a sort of “open season” for bids on a massive increase in their capacity to provide more LNG in the northeast. They call it the advanceLNG Project.

    The potential good news for producers of Marcellus and Utica Shale gas is that if the advanceLNG Project moves forward, it will need lots of natural gas from the region to feed it. advanceLNG is a potentially lucrative new market for the northeast’s abundant supplies of natgas…
    Read More “Potential New Market for Marcellus/Utica Gas: LNG for Use in U.S.”

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    Production from 4 Marcellus Drillers Keeps U.S. NatGas Prices Low

    An article on the investor website The Motley Fool does a good job of putting into context the enormous importance of the Marcellus Shale. According to the article, even though production from other major U.S. shale plays like the Haynesville has fallen in recent years, Marcellus production is up so dramatically it single-handedly keeps the price of natural gas low in this country.

    The article (read it below) also gives a quick roundup of four key drillers driving the success of the Marcellus…
    Read More “Production from 4 Marcellus Drillers Keeps U.S. NatGas Prices Low”

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    Former DOE Sec. Chu: Have Your (Fracking) Cake & Eat it Too!

    Steven Chu, former Secretary of Energy in the Obama administration (from 2009-2013) was the keynote speaker at America’s Natural Gas Alliance (ANGA) energy summit in Columbus, OH this week. Speaking yesterday to the assembled group of pro-drillers, Chu said fracking can be done safely. According to Chu, it’s possible to “have your cake and eat it too.” That is, fracking is safe and it provides inexpensive energy.

    Chu also predicted the price of natural gas for the next 20 years (brave man)…
    Read More “Former DOE Sec. Chu: Have Your (Fracking) Cake & Eat it Too!”

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    At What Mmcf Price Do Shale Drillers Make Money?

    Ken Medlock, senior director of Rice University’s Baker Institute Center for Energy Studies and a team of Rice researchers recently performed a study of shale drilling economics. One of the questions they looked at: At what price per million cubic feet (or Mmcf) must a driller sell the gas in order to at least break even and not lose money? They have some interesting findings…
    Read More “At What Mmcf Price Do Shale Drillers Make Money?”