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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: t4texas who wrote (220)	8/20/2001 8:01:55 PM
From: t4texas	Respond to of 36161

ng drilling economics at $3 gas (and other strip prices too) i finally got the time to read this 20 pager on high cost acquiring/lower ng prices and the economics for further drilling for e&p's. it is good, and for those who are not intimately familiar with the ball park numbers for hunting and drilling for ng and the ng prices needed to make it viable, this should be essential reading (imho). i think the link will take you there without registering with simmons. among the many items that are good, i found this text on page 6 quite interesting. in plain talk it means they think much of the drilling in 2000 and 2001 was quick pop, marginal stuff to get gas to market for the above $4 gas. my own personal takeaway from this (because i do believe this has happened) is when the demand side for ng happens again, ng price increases will be very sharp. "Nothwithstanding protestations to the contrary, some E&P companies have been vigorously pursuing acceleration projects over the past year -- quick hit, small reserve potential prospects designed more to capitalize on high front-end commodity prices and generate maximum returns than to add high quality, long-term reserves and production. The concurrent rise in gas prices and drilling activity suggests that a significant number of acceleration wells are being drilled. Determining with precision the number of wells that are uneconomic at gas prices under $3.50/Mcf is difficult. Directionally, however, we believe the lack of significant aggregate production growth in the face of record gas drilling is a sign that the proportion of marginal wells being drilled is significant." simmonsco-intl.com