Haynesville rigs drop, Sandridge CEO Ward still bearish

[Swizzled]

 

Ward has said that he thinks the Haynesville is the main culprit to keeping natural gas prices down.  I found a Credit Suisse note that shows the rig count is coming down fairly quickly now as HBP drilling slows.

 

http://valueinvestorcanada.blogspot.com/search/label/sd

[Myth465]

I tend to agree with Ward, I see a drop off in rig count but think gas is going to be in the dumps for the long term (3-5) years without some sort of fracking ban or new use / demand coming online.

[Swizzled]

 

I'm pretty sure that I can't figure out what is going to happen with natural gas.

 

There are a lot of companies shifting capex to oil.  SD isn't all that big, but CHK sure is.  They are the most active NG driller and they are going to move to oil rather dramatically.  Same for EOG, HK etc.

 

That has to have an impact at some point.

 

The production from those shale wells drop in a big way after one year, so drilling needs to continue. 

 

I follow Henry Groppe who has been very accurate in oil price predictions.  He actually has a huge database developed over 50 years that tracks the movements of oil being shipped around the globe to reach conclusions based on hard data.  He called for a big NG rebound this summer based on the declines and rig count drop in conventional NG plays.  Obviously dead wrong.

 

If he can't come close to getting it right, how can I ?  Oil on the other hand seems much simpler to understand.

[Myth465]

I have no idea what will happen. I think at some point we will have a spike due to less drilling, but either way that supply is there. Any spike will resume drilling, killing prices. Drillers have not been very disciplined and everyone in the US and Canada is itching to drill. I see a sea saw like effect, until we find a way to mop up that excess supply with some sort of game changing shift. I dont see a shift over the next few years, so I think we will see low prices, cured by low prices, only to see more low prices.

 

You can probably work the cycle and pick your spots to ride the upside. To me its easier to play oil. We have a secular boom going on and have several ways to win and only 2 ways to lose (A large discover or cheap oil, and world wide economic collapse). Excess supply is being sucked up each day with the growth of China and India.

 

[gaf63]

Good article from Rig Zone on NG supply and pricing , which backs up your thoughts Myth

 

http://www.rigzone.com/news/article.asp?a_id=101621

 

And all the drilling for oily liquids ng is still bringing on a lot of ng supply

CHK is just starting to move into liq production, SD is up to 28- 30 K boepd but needs to sell acreage to meet capex

Am looking at drillers that can play both sides and can expand to meet demand

[Myth465]

Thanks for the link. I think CHK will succeed.... In crushing the NGL markets lol.

 

I feel like Ward is talking directly about CHK when he says alot of producers talk about liquids, but they are mostly NGL - We mean oil when we say liquids.

 

I am excited that the majors are getting into nat gas. With Exxon lobbying for nat gas we should see something happen at some point. I also think the majors can continue pushing on exports to make nat gas more of a world wide commodity. The big breakthrough for the US would be running cars on compressed gas, but I dont know how we get there. I want to play the drillers, but cant figure out the land guys. Rig counts will fall and I dont have enough expertise to know which rigs do what (oil, gas, unconventional gas, shale, blah blah blah). Offshore to me is a bit easier to understand. I still watch PDS and HP and hopefully one day will see a good spot to get in.