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Gold/Mining/Energy : Oil & Gas Price Economics -- Ignore unavailable to you. Want to Upgrade?

To: Elmer Flugum who wrote (100)	4/25/1999 3:32:00 PM
From: Razorbak	Respond to of 350

Thanks, Len. Already read it. I think I have a lifetime subscription. <g> Razor

To: Elmer Flugum who wrote (100)	4/29/1999 9:41:00 PM
From: Ed Ajootian	Read Replies (1) \| Respond to of 350

A rare gem from the Yahoo PETD thread: Spoke today to a friend in the NG business, who in turn had spoken to a finance exec. with a major independant E&P Co. This finance exec. had recently completed an extensive study of the NG business in order to further guide his firms long-range plans (they also wanted to know if they should be laying people off when NG hit about $1.6). My friend relayed to me the following comments from this exec., which may be of interest: 1) Demand increases will almost certainly be outstripping supply in the next few years (nothing new to us here). Industry groups currently forecast 1% annual production increases. I'm betting that will change drastically. 2) Due to the expected demand increases, the number of rigs will have to at least double. 3) Orders for NG powered turbines for electricity production with General Electric are presently running with a two-year backlog. Well, sure I'd like all of those backordered turbines to be burning gas right now, but I think it speaks to what the power producers are thinking. Some other facts to consider: a) I believe that it takes just over one year for a NG producer to go through the application and permit process, before they can begin spudding a new well. The low rig count tells me that not a whole lot of new wells are presently being planned and undergoing this process. If necessary exploration and mineral leasing matters are not in place, this could take longer. I have a hunch that not a lot of resources have been devoted to this area recently, how bout you guys? b) 25% of all gas now in the pipeline comes from wells which are less than one year old. c) About 30% of the NG in a given well flows out in the well's first year of production, 60% in the first three years. d) NG storage facilities are presently about 1/3 full. I don't feel that we need a brain surgeon to tell us what's going to happen here. This may begin to feed upon itself as the surprise factor may come into play. Seems that some time ago, many investors decided that our society wouldn't be needing energy anymore, just lots of computer networks. This thinking may become unwound quite spectacularly over the next year or two. My thinking: If the U.S. has a winter next year, $4.00 gas seems quite likely and there will be a significant time lag until production can be "ramped-up". PETD is a solid, SAFE play on this trend, although not the most levereged or explosive. Hanging on for the long ride. Looking for $12/share by end of 2001.