Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: SliderOnTheBlack who wrote (83115)	12/31/2000 4:35:12 PM
From: tommycanuck	Read Replies (2) \| Respond to of 95453

Slider-I too would love to make money by shorting the NG producers but I don't think it is going to start this Tuesday! The one fact that is getting more credit than it deserves is the utilization of a few extra drilling rigs is going to solve the supply problem in a very quick way. The extra utilization seen over the past few months is significant (not exponential)but if you have access to a field where the activity is taking place you will see that it is being done with rigs and equipment that are vastly less efficent, crews that have little experience and are chasing reserves that have huge decline rates.When you think about it for a minute, the ability of the drilling contractors to run as efficiently with rig #1100 is certainly not as good as it is for rig #600. The depth and quality simply is not there. The extra rigs do not produce as much on a per rig basis as the base fleet! For years the declines on the low hanging fruit was in the 4-7% range. The reserves and deliverability of that gas could be predicted with a great degree of certainty based on past results from the field. The same is simply not true as we go forward. Decline rates one most properties now being drilled are between 20 and 30% on land and the statistics from 1998 in the GOM show first year decline rates of 46%. The industry is working harder and harder just to keep production flat and that is a large part of the problem. The answer to the supply problem lies in the northern reserves and LNG production from areas away from North America. Everyone is well aware of the costs and time involved in bringing these to bear. While I agree with you that the price will moderate over time it will not do so to the extent you are guessing because if the new high cost supply does not come on side we will not get there. The price will come down for one reason only in the near future and that is "less demand". How that is going to happen is anyones guess. The economy facing major problems is one way. Simply a slowdown will not be enough, in my mind, to reduce demand sufficiently to put the situation into balance. Demand has been underestimated significantly and continues to be. The entire consumer base in North America has been lulled by low prices for a number of years, the warmest winters on record and a lack of understanding about the ability of the industry to deliver on a perpetual basis. The numbers coming out of the producers have been masked by a significant amount of hedging and will be better into the immediate future. If you were an insider that has seen little in the way of personal return since the early 1980's, missed the last run, have worked hard to get your head back above water and all of a sudden have a chance to buy a yacht it would be hard to turn your back. It will be tough to look back on this one and make sense of it from a historical perspective so I am going to enjoy it. There will be buckets of money to be made on the downside of the E&P's but my guess is that just like everyone here saw the upside coming we will all see the downside coming long before the masses. New to the thread but am extremely impressed by the quality of the post and the wide and varied backgrounds represented. Good Luck and Happy New Year to all in 2001 (and beyond that so Slider can capitalize on his put strategy)