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

To: isopatch who wrote (92669)	7/22/2001 3:32:48 PM
From: isopatch	Read Replies (1) \| Respond to of 95453

Part Two. Why NG prod is lagging drilling. Like the novice demographer who fails to factor in lag time before a few years of high birth rates to join the producing and consuming members of a national economy, the energy analyst or financial writer is now making an analogous error IMO. Their focus' is almost exclusively on the past 12 months high NG drilling numbers vs CURRENT production stats is going to be blindsided by a significant increase in production during the next 6-12 months. OK you ask, what is it that they're not looking at and/or telling me that could significantly increase NG production? What is causing this lag time you're talking about? And when do we SEE THE GAS?! Whoa, use guys are tough on a quiet Sunday.<g> First, bear in mind, only new offshore oil has to wait on installation of production platforms and/or pipelines. By contrast, ALL and I repeat ALL NG wells need to have the plumbing before they can produce. Yep, as usual, "Devil's in the details"<g> Quickest to join the available production stream are onshore develpmental and infill wells drilled in existing NG fields. They are on production inside a few weeks. "Stepouts" aka small satellite fields close to the existing infrastructure need more pipe, and can be hit my minor permitting delays before the plumber can do his thing. Let's say 1-2 months. Moderate size new onshore fields take longer. More permitting and legal work to obtain easements across the long distance to hook into the trunkline with the many landowners that must agree before the pipe can be laid across or under their farms. While that goes on, engineers design any storage, processing and compression facilities. Then the operator (NG E&P) solicits bids for the infrastructure. If negotiations are required? The meter is probably running by again by that time<g>. Finally construction is begun and completed. Total: 3 - 6 months. For a large onshore field add a few months. How we doing so far? Looks like the more production we find? The longer it takes to see the add from the production. Hmmm. Then we come to the big investments: Offshore. For brevity, let's just ditto down the onshore time lags and add 25% for ea. comparable size offshore field to go through permitting, facilities design, bidding and contract negotiations, construction and finally that addition to total national NG production. But haven't we forgotten something? That's right. So far, this has all been sweet gas. Whether the field is on or offshore, "sour gas" requires much more extensive processing to extract the sulfur. So we have to budget more time as well as $$$ to build the desulphuring plant before the gas is pipline ready. For a large sour NG field that also is distant from the existing trunk pipeline we are talking about significant delays of at least several more months onshore. With new offshore fields over 12 months is common. For remote offshore discoveries it can take years of further exploratory and delineation drilling to even appraise the reserves in place. Only then would the close begin ticking bringing the field into the production grid. So IMHO, that's "The rest of the story" that I don't think current expectations has yet priced into the NG stocks LT. Even IF financial writers and W.S. analysts (many of whom know little the industry they cover) used lag times based on past cycles? They'd still underestimate the lag time between hi drilling stats and higher national NG production. The reason is simple. Textbook or old timers rule of thumb on lag still underestimate it. 20 or for that matter even 10 yrs ago we have the delays that occur now to satisfy the complex and multiple environmental authorities during the entire process from initial permitting to final pipeline hookup. Because much of the above has added significantly in recent years to the lag time between drilling and production, estimating the lag time is more an art than a simple quantitative exercise. But the fact remains that I don't see either the factors enumerated above or the months of additional time they add being considered in published "research" form W.S., or the financial press. IMO the NG production THEY think should be already in the system has only begun to show up. During the next 6-12 months we WILL...SEE THE GAS !! How bout a sample headline?!<ggg> "Energy analysts and experts are scrambling to ratchet up estimates, as NG production surges and stock prices drop AGAIN". Just like January, you can listen to me now or pay the price later.<g> In the meantime? Keep an eye on the tape. If we get confirmation of a good tradable Bear Market rally vs the recent wipsaws, be sure to enjoy it. I will.<g> No more time. I'm outta here. Best to all, Isopatch