Commodity Price

Commodity Price | Economic Impact | Industrywide Issues | Pennsylvania | Wyoming County (PA)

Oklahoma Manufacturer Buys Interest in PA Marcellus Wells
November 1, 2012November 1, 2012

This is a fascinating (to MDN) story about where the industry and economics for shale gas drilling may be heading. Yesterday LSB Industries, an Oklahoma City chemical (and equipment) manufacturer that depends on natural gas as its raw materials, announced they have purchased ownership interest in 14 producing natural gas wells, 7 soon-to-be producing wells and 36 yet-to-drilled wells in the Marcellus Shale, in Wyoming County, PA.

Why would a manufacturing company invest in natural gas wells? As a hedge against natural gas prices going higher—which they believe is going to happen relatively soon. They want a piece of the action that supplies their company with a key raw material, to keep their future costs down. Smart.

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Commodity Price | Economic Impact | Industrywide Issues | Pipelines

Marcellus May Produce Additional 5Bcf/d of Gas in Next 14 Mo
October 31, 2012October 31, 2012

A blogger on the Seeking Alpha website says the Marcellus is “a ticking time bomb” waiting to “explode” with a tremendous amount of new natural gas production that will flood into the U.S. marketplace over the next 1-2 years. How much new gas? Blogger David White makes a compelling case he believes an additional 5 billion cubic feet of new natural gas will flow—from just the Marcellus Shale region—by the end of 2013.

Here’s his reasoning:

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Commodity Price | Energy Companies | Equinor/Statoil | Exporting | Industrywide Issues | Pipelines

Statoil Starts Shipping NatGas to Canada, Plans NYC Pipeline
October 30, 2012October 30, 2012

In a bid to get more money for its natural gas, Statoil, a Norwegian company with major operations in the Marcellus Shale, said late last week they will start shipping gas to Canada effective Nov. 1. They also plan to build a new natural gas pipeline to Manhattan, NY.

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Beaver County | Commodity Price | Economic Impact | Energy Companies | Ethane | Industrywide Issues | Pennsylvania | Processing Plants | Shell | Statewide PA

Low NatGas Price Will Benefit Shell’s Ethane Cracker Plant
October 24, 2012October 24, 2012

The low price of natural gas may not be good for drillers, but it’s great for manufacturing companies who power their plants with it. The fact that manufacturers are increasingly converting to natural gas to power their operations, and relocating to areas with an abundant supply of low priced gas—like Pennsylvania—is a good thing for Shell and their proposed ethane cracker plant in Beaver County, PA. Why?

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Chesapeake Energy | Commodity Price | Economic Impact | Energy Companies | Hydraulic Fracturing | Industrywide Issues

NYT Now Says There’s Too Much Natural Gas, Drillers to Blame
October 22, 2012October 22, 2012

The New York Times is a bit schizophrenic these days. It’s hard to keep track of which alternate reality they operate in. For the longest time, we’ve heard from the Times how shale drilling is just a Ponzi scheme a la Bernie Madoff—a fraud to get investors to dump billions into energy companies but with only a teeny tiny bit of gas in the ground (“proven reserves”) to get out (see this MDN story). Of course that contention is patently false as proven by the overwhelming production and inventories we now have from shale gas.

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Commodity Price | Economic Impact | Hydraulic Fracturing | Industrywide Issues | Pipelines

S&P Report: The Marcellus Shale is a Game-Changer
October 17, 2012October 17, 2012

Ratings agency Standard & Poor’s yesterday issued an important new report on the Marcellus Shale and the key role it’s playing in the United States’ natural gas and larger energy picture. Titled “How The Marcellus Shale Is Changing The Dynamics Of The U.S. Energy Industry,” there’s a lot of great information in this report. For example: the report lists the Top 15 Marcellus Shale producers, with estimates of how much shale gas they produce (as of fourth quarter 2011). It also discusses how and why the Marcellus is one of the most cost-effective plays in the U.S. for producers, and why they can make money in the Marcellus at much lower commodity prices for gas than in other plays. It contains a complete list of pending and planned pipeline projects in the Marcellus, including ethane pipelines. And more!

MDN is still reading and digesting the report and will bring you select sections and highlights over the next few days. In the meantime, you can view the entire report below now (highly recommended):

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Commodity Price | Economic Impact | Industrywide Issues

Stone Fox Capital: Rig Count Means NatGas Shortages Coming
October 17, 2012October 17, 2012

Let’s take a deep dive into the “weeds” of the drilling industry, shall we? A few days ago MDN highlighted yet another excellent analysis (on rig counts) by Seeking Alpha blogger Richard Zeits, from Zeits Energy Analytics (see this MDN story). The big news from that story is Zeits’ view about the current and future levels of drilling rigs in dry vs. wet gas areas.

A new, somewhat contrary (to Zeits’) viewpoint has emerged on Seeking Alpha from Stone Fox Capital Advisors expressing concern and alarm over the relatively low level of drilling rigs. They believe the current and forecasted number of drilling rigs for oil means the number of rigs available for natural gas drilling is so low it will mean shortages of natgas rigs, meaning a bottleneck for new drilling and eventually lower supplies and higher prices for natural gas.

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Commodity Price | Industrywide Issues | Pipelines

Reuters Says Marcellus Pipelines will “Bully” Gas Prices
October 16, 2012October 16, 2012

Reuters has just posted an analysis of the major new pipeline capacity coming online in the Marcellus Shale region later this year and in 2013. The tone and tenor of the piece is “oh oh, natgas prices are screwed” because of all this extra capacity coming online. Here’s part of the article, which points out an additional 3 billion cubic feet per day of capacity will be online in the Marcellus in the next three months:

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Commodity Price | Economic Impact | Industrywide Issues | Research

EIA Report Predicts Short-Term NatGas Prices/Usage
October 11, 2012October 11, 2012

The U.S. Energy Information Administration (EIA) released their Short-Term Energy and Winter Fuels Outlook report yesterday (a copy of full report is embedded below). Even though natural gas inventories are above last year’s levels and the price for natural gas is at historic lows, based on long-range weather forecasts by NOAA, the EIA predicts households will spend more money to heat this winter because it’s going to be a lot colder this winter than it was last.

Here’s the main highlights from the report with respect to natural gas:

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Commodity Price | Industrywide Issues | Pipelines

New Marcellus Pipelines May Keep NatGas Prices Low
September 27, 2012September 27, 2012

Is the commodity price of natural gas heading up? Heading down? Depends on who you ask. Lately, it seems the overwhelming consensus is the price will go higher starting early next year, and indeed prices have been up recently from their historic 10-year lows (right now the NYMEX price is $3.25 Mbtus, it was just $1.90 not long ago). Natural gas is a commodity, and like any commodity, price is determined by supply and demand. If there’s more supply with steady demand, that equals lower prices.

A new article by Bloomberg (a perennially anti-drilling news service) predicts prices will go lower again—soon—because new Marcellus pipelines are coming online by the end of this year that will add an additional 30% capacity to supplies in the marketplace. How low will they go? One analyst quoted says prices may head back to the $2 range:

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Commodity Price | Hydraulic Fracturing | Industrywide Issues

Technology will Make Fracking Greener – Eventually
September 26, 2012September 26, 2012

Keith Schaefer, editor of the Oil & Gas Investments Bulletin, gave a wide-ranging interview to The Energy Report yesterday. He talks about the price of natural gas and oil in the U.S., fracking technology and more. It’s an excellent interview and worth your time to read.

Here’s one small excerpt on how, when and why fracking leads to lower crude oil prices in the U.S.:

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Commodity Price | Industrywide Issues

Analyst Predicts NatGas Price Will be $4 MCF by Year’s End
September 18, 2012September 18, 2012

Forbes has an article saying the commodity price for natural gas, which was at historic lows earlier this year, will go above $4 per thousand cubic feet (mcf) by the end of this year. The current price as of this writing is $2.87 mcf.

Here’s their argument (based on analysis by Canaccord) in favor of a big upswing in natural gas prices:

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Commodity Price | Economic Impact | Hydraulic Fracturing | Industrywide Issues | Statewide WV | West Virginia

WV Gas Utility Files to Reduce Rates for All Customers
September 17, 2012September 17, 2012

Once again an abundance of clean-burning Marcellus Shale natural gas is benefiting everyone—not just energy companies and landowners. Mountaineer Gas Company, serving 226,000 residential and business customers and the largest natural gas distribution company in West Virginia, recently filed to lower rates on natural gas for its customers by a substantial amount:

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Commodity Price | Industrywide Issues

EIA Short-Term Prediction for 2013: NatGas Avg $3.34 Mmbtu
September 12, 2012September 12, 2012

Each month the U.S. Energy Information Administration (EIA) publishes a Short-Term Energy Outlook. EIA researchers crunch the numbers, analyze the trends, and haul out the EIA crystal ball to predict what will happen in the next 12 months.

Here’s the section where they talk about natural gas supply, demand and prices they expect over the next year:

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Commodity Price | Industrywide Issues

Latest EIA Numbers Show NatGas Production Still High
September 4, 2012September 4, 2012

Energy industry consultant and investment analyst Richard Zeits writes on the Seeking Alpha website about the U.S. Energy Information Administration’s latest natural gas production statistics released on Friday. He observes that natural gas production in May and June for the lower 48 states remained virtually unchanged. Which means the commodity price for natural gas is likely not going up any time soon. Huge quantities of supply with the same demand equals low prices—Econ 101.

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Commodity Price | Industrywide Issues

Is Wet Gas Following Dry Gas Over a Price Cliff?
August 31, 2012August 31, 2012

Since the beginning of 2012, hardly a quarterly earnings/operations report from an energy company, nor a story about natural prices, has failed to point out how drillers are now focused on “wet gas” areas in shale plays. For the Marcellus and Utica region, that means a shift from drilling in northeast PA to southwest PA, northern WV and eastern Ohio, where wet gas deposits are found. Wet gas simply means there are extra hydrocarbons that come out of the bore hole along with “dry gas,” i.e. methane. Wet gas hydrocarbons include propane and ethane.

A story in today’s Pittsburgh Post-Gazette chronicles the rapid drop in the commodity price for both propane and ethane because of increasing supplies from shale gas drilling. It feels like the dry gas price story all over again. Too much supply, not enough demand.

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