Natural Gas 75% Gain Speeds Horizontal Drilling at Devon Energy (DVN), Range Resources (RRC)
Submitted By Trader Mark
Nothing interesting to add that has not been said before, but an interesting read if you are unfamiliar with natural gas. It all feels toppy to me, but standing in front of 10,000 hedge fund computers furiously buying month after month is a painful exercise. As with all euphoria/bubblicious moves - it will end when it will end. Not a moment before. Nat gas is creating entire boom towns such as Fort Worth, Texas and making serious money for normal Americans who happen to have bought land in the right random place in certain states (PA has been hot lately)
- U.S. natural-gas producers are drilling wells previously deemed too costly and resurrecting abandoned fields from Appalachia to the Rockies, spurred by the biggest rally in fuel prices in eight years.
- DVN:US' ))">Devon Energy Corp. (DVN) and Range Resources Corp. (RRC) are drilling horizontal wells that cost three times as much as traditional vertical shafts to unlock gas from rock formations that were unprofitable to exploit before this year's 75 percent gain by gas futures.
- The number of active U.S. gas rigs rose to a nine- month high last week, according to a survey by Baker Hughes Inc.
- The rise in gas futures in New York this year exceeded the 45 percent surge in oil and all commodities besides coal. U.S. gas demand probably will grow 4 percent this year, double the rate of new supply
- An IND' ))">index of independent energy producers in the Standard & Poor's 500 climbed 29 percent this year, led by gains of more than 60 percent at Southwestern Energy Co. (SWN) and Chesapeake Energy Corp. (CHK)
- New drilling projects will boost U.S. gas IND' ))">supplies in 2009 by 3.6 percent, the biggest increase since 1994, Read said.
- Gas is the most widely used U.S. furnace fuel and the third-largest source of power generation, according to the Energy Department.
- The U.S. Bureau of Land Management, which oversees energy exploration on federal property, issued 7,124 permits to drill in the fiscal year ended Oct. 1, 5.7 percent more than fiscal 2006. Nine out of 10 of those permits were issued for projects in Wyoming, New Mexico, Utah and Colorado. (note to self: start buying random parcels of land in these 4 states and wait for natural gas company to knock on door to lease or buy me out)
- RRC:US' ))">Range Resources, based in Fort Worth, Texas, increased its capital budget 40 percent this year to $1.27 billion to sink more wells in the Barnett Shale in Texas and the Marcellus Shale in Pennsylvania and West Virginia. (these are 2 of the "hottest" spots in the U.S. for nat gas)
- Drilling horizontal wells in deep, hard deposits such as the Barnett Shale costs about $3 million each, compared with $1 million to $1.5 million for a vertical well. Horizontal drilling is costlier because it requires more sophisticated rigs with more powerful motors. Horizontal drilling is the only way to tap formations that otherwise won't give up their gas, Ventura said.
- Competition for drilling equipment and rig crews is escalating costs for producers, said Pine Brook's McMahon.
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