Leslie’s Notebook

Thanks to analyst Richard Nehring in Colorado Springs, Co., we have a great new term to use, “disruptive shales,” that I think perfectly sums up what is happening now and will only be more pronounced in the next few years.

Nehring, founder of Nehring Associates, says there now is, and will be, so much more natural gas production possible in the U.S. that gas prices could be in a for a long and trying siege of volatilty and lower numbers.  See Oil and Gas Investor’s January 2009 issue for his article on this topic.

Just look at the Barnett shale–as of last August (per latest data), production had risen to 4.6 Bcf a day, compared to 3.5 Bcf as of December 2007. At least a further 500 MMcf a day is shut-in, either waiting on more takeaway capacity, or being blocked by local regulatory bottlenecks. This is according to my most recent chat with Gene Powell, editor and publisher of the Powell Barnett Shale Newsletter in Fort Worth.

As E&Ps rightly tighten their capital spending, their disciplined focus is being directed only to their best plays, and that often means the shales. Range Resources is a good example. It plans about 50 horizontals and 25-plus vertical wells in the Marcellus shale in 2009. It will also test 40-acre spacing there. Its current Marcellus production of about 30 MMcf a day is estimated to be, at year-end 2009, nearly 100 MMcf a day, or triple the current output.

Match that kind of progress with that of operators in the Haynesville, the Fayetteville and so on, and you get the picture: Disruptive.

–Leslie Haines, Editor-in-chief, Oil and Gas Investor

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