Sunday, August 29, 2010

Marcellus Musings

From the Cleveland Plain Dealer: Natural Gas Prices Lowest in 11 months. SeekingAlpha: Natural Gas Free Fall Continues, More Downside Remains.  Why do I keep mentioning this? All those new Marcellus leaseholders counting on future royalty payments should pay attention. Remember the industry won a court ruling recently that those payments are based on net, not gross revenue from the value of NatGas. So the movement of natural gas prices at market now has a direct income impact for a lot of local folks.

One more from the WSJ: The Boys of Summer: Oil and Gas

Not the end of the tunnel either. MarketWatch: Money managers bet nat gas prices will go lower. Longer run ever more natural gas may be coming to market.

For the "Hmm?" file.  Via BusinessWeek: Most Marcellus Shale drillers fail statutory reporting on their production

More energy news that may impact us via Platts: Russians want our coal.


Anonymous The Wiz said...

Gas prices are certainly lower and may to continue to drop as more wells are drilled and technology gets more gas out of each well. But they may go up as utilities and industry covert from coal to gas. Lots of influences at play. The Alaskan line will take 8 to 10 years, if it gets built.

As for the court ruling on royalty calculation, it all depends on your lease. The standard lease allows such manipulations but a lease can be written to protect the landowner. One needs to be educated, get a good agent to represent them, and most of all a good attorney with gas and oil lease experience review ANYTHING and EVERYTHING before you sign it. There are huge problems with the standard lease that ones gets from gas companies at first offer.

As a bonus for consumers; Marcellus gas burns much hotter than standard gas, around 1200 degrees. It is so hot that it cannot be used directly in home furnaces or stoves. The gas companies mix the Marcellus gas with gas from other sources such as the Gulf Coast to dilute it. But so much Marcellus is being produced here that home use gas is burning hotter than it did in the past.

I have an old gas stove with three pilot lights. I can feel that the stove is warmer than it was in the past because of the gas mix is hotter. This may reduce heating bills for people since they will get more BTUs per MCF. This is just my observation as I haven't seen any else discuss this but it makes sense to me.

Sunday, August 29, 2010 12:52:00 PM  
Blogger C. Briem said...

Seems to me some of that advice would be best for you to take yourself. If you are merely looking for best deal for 45 acres near Pittsburgh, I would just get a good lawyer and not obsess so much. Will you let us know what deal you get when you do decide? No need to divulge specifics, but the general range. Or are you planning on holding out for some time? Inquiring minds would love to hear from the front lines.

Sunday, August 29, 2010 3:08:00 PM  
Anonymous The Wiz said...

I have a group of landowners that has 1400 acres. We have an agent company that is negotiating for us. Our agreement with them expires at the end of Oct so I hope to have a lease by then as I have been working on this for three years! Was near a deal in 2008 but the offer was withdrawn when the credit crisis hit. But it has played to my advantage as the offers have gone way up since then, mostly because the wells are producing much more than originally predicted.

Wish I could foretell the future. If I don't get an agreement, what will happen with offers in the next year? Will they drop if gas prices drop more? Or will the Utica shale prove to exceed the Marcellus as some predict thus doubling the value of gas leases? Wanna help me out with the future?

And I will have a lawyer go over anything before I sign it.

Sunday, August 29, 2010 7:12:00 PM  
Blogger C. Briem said...

Sounds like your history is near identical to the group in Washington County with 14K acres.

I don't try to out-think the market, but the futures market think natgas prices will be low for years.

The great myth of economics, ceteris paribus, is never the truth. Realize that if half the hype of marcellus, or utica, or purcell limestone for that matter, is true then it can only put additional downward pressure on natural gas price in the long run. Can't have your cake and eat it too.

Sunday, August 29, 2010 9:44:00 PM  
Anonymous MH said...

Can't have your cake and eat it too.

If you want to have a cake, use fondant. If you want to eat it, use butter cream icing.

Monday, August 30, 2010 8:23:00 PM  

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