The natural gas whiplash * updated

Karl Lassberg — Fri, 11 Sep 2009 01:00:00 GMT

The ongoing decline in natural gas prices chips away at some parts of the industry while providing opportunity to others.

Trident Resources, a private Canadian firm focused on coal bed methane plays in Alberta, Canada, filed for Chapter 11 bankruptcy protection today, citing the low prices for the move.

And Epsilon Energy, another Canadian producer, started production for a new Marcellus Shale well earlier this month and shut in another well a few days later when it couldn't get a good price on the market. In an e-mail exchange Epsilon CEO Zoran Arandjelovic said the price offered was below $2, but he hopes it's just a temporary issue.

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Update:
Houston-based Goodrich Petroleum Corp., which is in a joint venture with Chesapeake Energy in the Haynesville Shale, has suspended drilling in Texas to conserve cash for Louisiana leases, according to Bloomberg.

"As much as 15 percent of mineral leases on the richest portion of the 3.5 million-acre Haynesville deposit may be up for sale by year's end by companies that can't afford to keep them after fuel prices dropped, Chief Operating Officer Robert C. Turnham said yesterday in a interview in New York," Bloomberg reports.
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But if you're in the natural gas storage business these could be heady days, notes the WSJ. Houston-based Enterprise Products Partners is reaping the rewards, as is a natural gas storage firm tied to Houston-based Centaurus Advisors.

The analysts at Societe Generale (just say "SocGen" and everyone will know who you mean) are not too optimistic, however. They say a sustained $3 per MM/Btu price "should trigger production cuts this fall" and as banks make their end-of-year reevaluations of E&P company reserves "credit lines will be more expensive and thus future development costs will increase."

The current prices are well below the marginal cost of production of the most profitable shale play, Haynesville -- $2.88 MMBtu, an estimate by Bentek Energy (based on a zero-dollar net present value and 10% IRR).

10-Sep-09 8:00 PM

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The natural gas whiplash * updated