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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: Tomas who wrote (12180)8/14/2002 11:53:39 PM
From: GaAs52  Read Replies (1) of 206207
 
ng shortage? I thought in free markets there can not be shortage of something. There will be goods with escalating prices. And you all know what happens to the ng demand when the price of ng escalates. And when OS and rig rates peak, you may refresh your memory on what happens to E&P capital spending. At ng prices north of $4, E&P companies cut their spending because OS and rigs rates were deemed very expensive.

Yes, there is a fundamental problem with ng story due to rapid depletion and this is a bigger fundamental problem for drilling industry in North America. Because, at their peaking rates, they do not provide "value" to their customer; and their customers can not deliver value to their industrial customers at ng prices north of $3.

This so-called ng shortage can not be resolved by aggressive drilling in mature N. American fields. Drillers make a hole and these holes get dry (almost) quickly per "the depletion theory". Sometime soon, E&P will stop drilling more (and they stopped) because it does not work, especially at peaking OS and rig rates. The so-called ng shortage will be resolved by something else, either by contracting demand, lng or something else. Drilling and other OS will have their erratic booms at general economic growths but not a secular growth. And the erratic earnings of such industry can not sustain such lofty valuations. Just check out the earnings OS and drillers for the past quarters (and for the immediate future quarters). Most of them have no earnings or very little.
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