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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Bearcatbob who wrote (182845)	3/2/2014 8:29:27 PM
From: Hannoverian	3 Recommendations Recommended By Bearcatbob Biotech Jim DELT1970 Read Replies (1) \| Respond to of 206334

Bob you make me work hard, but since it has turned cold & is drizzling I will try & clarify as the NG is burning to keep me the this home warm. First yes the overall Unconventional NG production is declining @ a rate of 32-34%/year. What does this mean? Let me go back & reference the work that EOG & Mark Pappas published yearly starting sometime in the mid '70's & continuing to fairly recently. I do not think EOG currently makes the data & the composite NG production decline curves/Basin public. I never ask Mark why did initiated the considerable effort-Staff work by PE's-gathering the well production data, compile the data/Basin & ultimately recognizing that the data tied pricing & rig count. You need to remember, until & starting in ' 04, NG production was nearly exclusively from Conventional reservoirs. I know CBM was being produced but @ the time, the production was more a function of yearly Tax Credits & was not something the Independents & the few majors still drilling in the US for NG pursed. OK bear with me for a few more details. @ the time, actually a few years earlier NG became a commodity & the $ price/MCF went from $1.80-$2.40/MCF to ~$4.00-$4.80/MCF. Thus the increased interest in drilling for NG. Oil had recovered to >$40.00/BBL thus the 10:1 ratio that everyone was happy with. The EOG work noted that early in this past decade ~550 rigs were required to maintain Domestic NG production @ it's level of <60 BCD/day. Again everyone was happy, including me. Then my neighbor George Mitchell just could not quite trying to make $ in the Barnett Shale. Poor George, sorry worse metaphor, that was Governor Ann Richards referring to George Bush. Anyway, as we all know George, as in Mitchell succeeded & we can fast forward to today. Enough history, other than places like the GOM Shelf that use to supply ~25% of the Domestic NG supply now supplies ~10%. That story continues to today where Conventional=Unconventional @ ~33.5 BCF/day coming from all of the wells currently producing in the Conventional Fields & these Basin Wide Unconventional plays. Now I will try & make my point regarding Basin Wide declines versus individual NG well declines. Let go to the Marcellus & increase 2014 production by my previously suggested 1 BCF/year. That will have the Marcellus producing ~15 BCF/day on 1/1/'15. With a 33% Basin Wide decline, which assumes drilling to maintain NG production, the decline will be 5 BCF/day. The latest B-H rig count has 80 rigs working in the Marcellus, again one huge Basin, & they will not be drilling four (4) wells back-to-back from a brand new pad with a giant facility to handle 50 MMCF/day-hopefully. Instead now rigs are offsetting good IP wells or wells with high EUR's thus a one well or @ best two wells then mob/Demob which takes time & weather can be a problem! Nearly done, those 80 rigs might D&C-the evil frac job-1000 wells Basin wide, some in the dry gas portion some in the oily window & some in the high NGL areas. All in & on average the new wells will contribute/produce 5 MMCF/day, magically a cumulative production of 5 BCF/day. Again a very simple model but this is how it works. Except today the US has ~340 rigs drilling for NG. Most Basins declined YOY '12 to '13. The Marcellus bailed the US out to date & overall got us the ~1 BCF/day increase I noted. I hope this helps. Dinner is calling. No edit just hit submit. OH yea, one illustration: