Gas Utility & Midstream - Operations and Strategy
| Rig count no longer clear picture of production; Marcellus emerges as low-cost basin |  |
November 03, 2009 10:14 AM ET
By Bryan McBournie
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BENTEK: Rig count no longer offers clear picture of production Rig count is no longer a clear barometer for natural gas production due to significant improvements in drilling technology and growth in unconventional gas resources, analysts with BENTEK Energy LLC said in an Oct. 28 white paper titled "A New Era in Rig Productivity." For decades, the tight correlation between the rig count and natural gas production has enabled the energy industry to accurately forecast future natural gas supply. In the past, when the rig count increased, production growth was soon to follow, BENTEK analysts said. When the rig count fell, production eventually declined. Industry analysts view Marcellus Shale as one of the lowest-cost supply basins The outlook for natural gas production in the United States is bright, even in a volatile commodity price environment, in part because of the continued development of shale plays, such as the Marcellus, presenters said during a Platts Appalachian gas conference Oct. 29 in Pittsburgh. "The bottom line, gas prices are going to be great next year and OK in the short term," Dave Pursell, managing director and head of macro research at Tudor Pickering Holt & Co., said during the morning session of the conference. Pursell said he anticipates gas prices ranging between $5/MMBtu and $8/MMBtu in the near future, with the expectation of prices reaching $7.50 in 2010 and $6.50 in 2011. Environmental group urges Chesapeake to release leases in New York City watershed EARTHWORKS' Oil and Gas Accountability Project is urging Chesapeake Energy Corp. to release its leases in the New York City watershed following the company's announcement that it does not plan to drill in the watershed. "There are some places, like the New York City watershed, that should be off limits to drilling," Gwen Lachelt, director of the project, said in a Nov. 2 statement. "We urge Chesapeake Energy to walk their talk and relinquish their leases in the watershed so that the area can be permanently protected." Denbury agrees to acquire Encore in $4.5B deal Denbury Resources Inc. said Nov. 1 that it will acquire Encore Acquisition Co. after entering into a definitive merger agreement valued at approximately $4.5 billion. The deal is expected to close in 2010. The boards of both companies have approved the deal. Under the terms of the agreement, Denbury also would assume the debt and value of the minority interest in Encore Energy Partners LP. The deal would make Denbury one of the largest independent oil and natural gas companies in North America. It would also create one of the largest carbon dioxide enhanced oil recovery platforms in the Gulf Coast and Rocky Mountain regions. Williams to invest $4B through 2011, most on shale plays Williams Cos. Inc. said in its third-quarter 2009 earnings presentation Oct. 29 that it remains focused on its existing assets, particularly its shale plays, planning an investment of more than $4 billion between 2009 and 2011 to help develop properties in the Piceance Basin in Colorado and the Marcellus Shale in Pennsylvania. Williams Chairman, President and CEO Steven Malcolm told analysts that the company's midstream sector is anticipating growth of nearly 60% through 2011, driven by higher natural gas liquids margins, production from new projects such as Blind Faith in the Gulf of Mexico and Willow Creek in the Piceance Basin, and strong results from the company's pipeline sector, "primarily thorough expansion projects." API releases new guidance documents for hydraulic fracturing The American Petroleum Institute on Nov. 2 released its second of four documents to address the increasing role of hydraulic fracturing. The new guidance document, "API HF1, Hydraulic Fracturing Operations — Well Construction and Integrity Guideline," outlines the current best industry practices for the proper drilling and cementing of wells that are being hydraulically fractured. The document is designed to ensure that shallow groundwater aquifers and the environment are protected throughout the drilling, completion and production phases of a well's life, the association said in a news release. SEC updates guidance on how its staff interprets oil, gas accounting rules The SEC's Office of the Chief Accountant on Oct. 30 updated the agency's guidance on how its staff interprets accounting rules for the oil and gas industry. The changes are part of the SEC's effort to modernize its oil and gas company reporting requirements and help investors evaluate how much their investments in the companies are worth. The revisions include changing the price used in determining quantities of oil and gas reserves and eliminating the option to use post-quarter-end prices to evaluate write-offs of excess capitalized costs under the full cost method of accounting. The revisions also remove the exclusion of unconventional methods used in extracting oil and gas from oil sands or shale as an oil and gas producing activity. Also, some questions and interpretive guidance that are no longer needed will be removed from the process. | 
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