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Discussion Starter #1
Saw an article in the Wellsboro paper about the impending cutbacks in the number of gas drilling rigs in the state. To much supply and low prices are making it unprofitable to keep drilling.

Drill rigs are pulling out of the "dry gas" areas and moving to areas with "wet gas".

Looks like drill rig numbers will be cut in half.

Was reading online today that one company will now turn more of it's focus towards drilling for oil in the U.S.
 

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Dutch said:
Saw an article in the Wellsboro paper about the impending cutbacks in the number of gas drilling rigs in the state. To much supply and low prices are making it unprofitable to keep drilling.

Drill rigs are pulling out of the "dry gas" areas and moving to areas with "wet gas".

Looks like drill rig numbers will be cut in half.

Was reading online today that one company will now turn more of it's focus towards drilling for oil in the U.S.
That company would be Chesepeake Energy. They are shutting down about 50% of their Dry Gas wells and going wet. The low price of gas is exactly why they made the decision. Instantly, their stock went up and the price of natural gas moved up. They are that big of a company.
 

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Is that the same DOE that awards loans to Solyndra?

Does this mean the US will have to rely on firms like Solyndra in the future so we must loan them more money since the NG resources won't cover as much of our energy needs? Amazing!
 

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Discussion Starter #5
You responded to me, why?
 

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my response was meant to Esox's post don't know how you came up ???

Not a great market to be sinking a whole bunch of money in for little return...is it?

However a bright spot for some of the landowners who signed old leases for little in the way of signing bonuses and minimum royalty amounts will be afforded time for the old leases to expire and to re- negotiate perhaps a better lease.
 

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Discussion Starter #8
My guess is that the lucrative lease rates of the past, are just that, past....
 

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The older the play the more lucrative the new leases will be.

As the prime areas are identified and exploited any remaining lands will be worth that much more... Now some of the more marginal areas will be worth less..a lot less, until a price increase makes the drilling more profitable.

As new markets develop demand will rise to take up some of the surplus we are experiencing now... And new markets will be developed..this is all just starting.
 

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Watch the Utica Shale. If it is as wet(ngl) and oily as CHK claims, it will dwarf the Marcellus in importance. Methane will be a by-product of the ngl and oil wells and will further supply the dry gas market.
CHK and their CEO rely alot on hype. The state of Ohio is supposed to release well data in March. Then, we will know more.
I have a small investment in CHK and have done pretty good because I got in real low. The company has issues for sure. But, they could strike it big with the Utica.
 

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Lots of things at play here in PA, gas-wise: Market prices; Need for limited number of rigs elsewhere; Pipeline projects planned/underway; Uncertainty of PA's intentions for extraction fees, etc.

Probably the two biggest factors, are market prices and rigs needed somewhere other than PA?

Distribution pipelines are being installed in many areas of northern PA (some just experienced a work stoppage due to a strike), but many smaller ones still need installed, so scattered wells can eventually be tapped.
 

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Chesapeake Energy Corporation Updates Its 2012 Operating Plan in Response to Low Natural Gas Prices
1/23/2012 1:01 AM

Chesapeake Plans to Reduce its Operated Dry Gas Drilling Rig Count to 24 Rigs, a Decline of Approximately 50 Dry Gas Rigs from its 2011 Average Operated Dry Gas Rig Count

Chesapeake Plans to Curtail its Gross Operated Gas Production by up to 1.0 Bcf per Day and Plans to Defer New Dry Gas Well Completions and Pipeline Connections Wherever Possible

Chesapeake to Redirect Capital Savings from Curtailing Dry Gas Activity to its Liquids-Rich Plays that Deliver Superior Returns

Chesapeake’s Undeveloped Net Leasehold Expenditures in 2012 Projected to be Approximately $1.4 Billion, Down from Net Leasehold Expenditures of $3.4 Billion and $5.8 Billion in 2011 and 2010, Respectively


OKLAHOMA CITY--(BUSINESS WIRE)--Jan. 23, 2012-- Chesapeake Energy Corporation (NYSE:CHK) today provided an update on additional steps it is taking to continue creating shareholder value in response to the lowest natural gas prices in the past 10 years.

First, Chesapeake plans to further reduce its operated dry gas drilling activity by 50% to approximately 24 rigs by the 2012 second quarter from 47 dry gas rigs currently in use and by 67% from an average of approximately 75 dry gas rigs used during 2011. Chesapeake’s operated dry gas drilling capital expenditures in 2012, net of drilling carries, are expected to decrease to $0.9 billion, a decrease of approximately 70% from similar expenditures of $3.1 billion in 2011. This anticipated level of dry gas drilling capital expenditures is the company’s lowest since 2005. Specifically, during the 2012 second quarter, Chesapeake plans to have reduced its drilling activity in both the Haynesville and Barnett shales to six operated rigs each and to 12 operated rigs in the dry gas area of the Marcellus Shale in northeastern Pennsylvania.

Second, the company plans to immediately curtail approximately 0.5 billion cubic feet (bcf) per day, or 8%, of its current operated gross gas production of 6.3 bcf per day, which is about 9% of the nation’s natural gas production. If conditions warrant, the company is prepared to double this production curtailment to as much as 1.0 bcf per day. In addition, wherever possible, Chesapeake plans to defer completions of dry gas wells that have been drilled but not yet completed, and also plans to defer pipeline connections of dry gas wells that have already been completed.

As a result of lower drilling and completion activity and production curtailments in the Haynesville and Barnett shales, Chesapeake projects that its combined gross operated gas production in these plays will decline during 2012. Because the Haynesville and Barnett shales have accounted for virtually all of the nation’s approximate 14 bcf per day of gas production growth during the past five years, lower production in these two plays will likely lead to flat or lower total natural gas production in the U.S. in 2012.

Third, the company intends to reallocate the capital savings from reduced dry gas drilling, well completion and pipeline connection activities to its liquids-rich plays that offer superior returns in the current strong liquids price environment. This reallocation will result in increased expenditures in certain of Chesapeake’s liquids-rich plays, including the Eagle Ford Shale, Utica Shale, Mississippi Lime, Granite Wash, Cleveland, Tonkawa, Niobrara, Bone Spring, Avalon, Wolfcamp, and Wolfberry. The company estimates that approximately 85% of its 2012 total net operated drilling capital expenditures will be invested in its liquids-rich plays.

Fourth, Chesapeake plans to further reduce its undeveloped leasehold expenditures, the majority of which have been focused on liquids-rich plays during the past three years. The company is now targeting to invest approximately $1.4 billion in undeveloped leasehold expenditures in 2012 (net of joint venture partner reimbursements), of which approximately 90% will target liquids-rich plays and 100% will be in plays where the company is already active. This compares to undeveloped leasehold expenditures, net of joint venture partner reimbursements, of approximately $3.4 billion and $5.8 billion in 2011 and 2010, respectively.
 

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The price of gas plays a big factor. Dry gas is "market ready". "wet gas" requires refinement. Like crude oil.

Dry gas is more economical when gas prices are higher as there is no need to refine... When the price drops...the residuals in wet gas make it the more lucrative commodity.

Caveat: Please don't bet your childs college fund on my economic advice~
 

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Discussion Starter #16
Have you considered that it might be you, just "losing it"? LOL
 

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Discussion Starter #17
One thing that can't be said is that they are leaving the state due to a Severance Tax. LOL
 

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Dutch said:
Saw an article in the Wellsboro paper about the impending cutbacks in the number of gas drilling rigs in the state. To much supply and low prices are making it unprofitable to keep drilling.

Drill rigs are pulling out of the "dry gas" areas and moving to areas with "wet gas".

Looks like drill rig numbers will be cut in half.

Was reading online today that one company will now turn more of it's focus towards drilling for oil in the U.S.
Chesapeake is cutting back half of their rigs, but they still have more rigs than any of their competition in Marcellus north.
 

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A snapshot of the last 3 years.
1) Economy in a downturn
2) Large new supply of natural gas going into production
3) No new immediate demand
Law of supply and demand dictates a decrease in price.
The future (maybe):
1) power plants convert from coal to NG
2) fleet vehicles convert to NG
3) chemical plants built using NG
4) Liquified natural gas exported
5) continued but slow increase in production
Results in a slow but steady increase in price, striking a new equilibrium in the $5-6 range. Affordable, yet generating a decent return for production companies.
 

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OPEC has been adjusting oil production based on inventories and market price for decades.

I don't see anything different with Chesapeake's action. Simple business decision, IMO.
 
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