To: BigBull who wrote (64657 ) 4/14/2000 7:42:00 PM From: Big Dog Read Replies (1) | Respond to
ALBERTA GAS OUTPUT SLIDING Field receipts, the amount of gas going into Alberta?s gathering system, are running about 3% lower than a year ago, putting the production shortfall at roughly 400 BCF/day compared to last April. We are told there are no unusual plant outages or weather-related factors at work ? the gas production capacity in Canada?s most important province is simply lower than twelve months ago. While this may seem incongruous in light of strong prices and relatively high drilling activity, a look at the nearby map helps explain the paradox. Over 70% of the completions for the 1998-99 period have been in the eastern half of the province. These are typically low risk, shallow development wells with limited production capacity and high initial decline rates. Southeastern Alberta saw 57% of the total completions. But the average well in that region only managed to produce 190 MCF/day. Wells in the northeast had initial rates that were barely twice as large, also a small amount of new output. The higher potential western portion of the province gets only 30% of the completions, a level that probably will not change much in view of the logistical and permitting difficulties in working that area. Gas supply to the U.S. from western Canada will be lower this year, another reason to expect continuing firm prices. The Henry Hub 12-month strip, at $3.12/MMBtu yesterday, is in uncharted territory and winter price spikes are possible. Some gas producers? shares have seen strong rallies in recent weeks but could still have upside potential, particularly if those oft-maligned momentum players get back in the game. In Canada, the best value is in the mid-sized firms, with Paramount Resources (POU-C$13.00) and Petromet Resources (PNT-C$3.86) having superb leverage to natural gas. Stateside, the large-cap companies appear to be the cheapest group, with Burlington Resource?s (BR-$37.00) Canadian assets adding to its appeal. -- John S. Herold, Inc.
