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Gold/Mining/Energy : Shale Natural Gas, Oil and NGLs and ESA
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To: jrhana who wrote (843)7/11/2009 10:23:43 AM
From: jrhana  Read Replies (2) of 6160
 
I had thought of separating this into two threads, one NG as a whole and the other on ESA, but I really do not want the distraction.

And more importantly, ESA is what led me into this whole shale NG phenomenon and the more I learned the more fascinated it got.

I was asked how do we invest in the Marcellus Shale? I am not sure about the E&P companies. There could be several nice investment opportunities. I don't believe that all of these companies including heavy hitters like Exxon and European bigwigs like Statoil are investing so much time and money in shale NG if they did not believe they are going to make a profit down the road.

I agree with the concept that down the road we should see less violent swings in the price of NG. Because it's very simple. The price goes too low, just shut down your wells. It's as simple as turning a valve. Then when the price goes higher, just turn them back on. A self regulating mechanism.

I don't think these companies will ever see huge margins on a price basis. So how will they make money? They will make it up in volume. I once to talked to a guy who had spent his life starting up successful business ventures. He told me that everybody always talks about profit in terms of a percentage of sales. But he told me that was precisely the wrong thing to worry about. What matters is your return on capital invested.

I am sure these companies are expecting a nice return on the capital they are now so vigorously investing.
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