Originally Posted by haha
Although your viewpoint as an industry participant is helpful in some ways, it also gives you a very different bias and interest from someone who is primarily interested as an investor, or as a citizen trying to see into the future.
Your need is well paid, continued employment, as long as you intend to work. And security of your pension, if you have one. An of course what part of the industry you work in makes a big difference.
Drilling is at very high levels in the US today, which is very good news for anyone connected with drillers, or mud suppliers, or fracking chemical suppliers, pipe, etc. IOW, an employee or principal in this industry is in hog heaven, as the producers costs are their income.
But lease fees in the more periperal areas of some of these gas plays, for example the Haynesville, and some of the Marcellus have fallen dramatically recently.
For some industry participants the best world is one in which producers are on a treadmill trying to keep up production with rapidly depleting expensive wells, as long as there is acreage to be drilled and capital to drill it.
Full disclosure, I do work for an operator ("producer"). And I do agree that my view point is different from that of an investor. I choose not to tilt towards Oil/Gas/Energy beyond what my index funds give me. Since my income is derived from that industry as well.
But, I would like to address some of the things that were said above, which my experience shows me to the contrary. 1) In the woodford (oklahoma), I drilled some wells last year with the expectation of them being un-economic stand alone, but the idea was they would hold the lease. I found service prices were dropping, and I was able to drill them for about $2MM less than what my employer thought I would. One well has paid out already in about 1 year, the other will soon. With that success, it prompted a small private company to drill an adjacent section. So, these areas aren't so devastated as many would think. Yes, rig count is down, but there are companies out there betting an improvement of gas price and getting the wells down now while they are cheap. To me, this is the correct approach, as the wells will probably pay out in 2-5 year range with today's prices if you can control your costs. Everything else is upside, with little downside. Very few public companies will do this though, b/c investors don't want $50MM+ developments in nat gas.
2) as far as leasing costs in the marcellus. We had some expiring leases and sent the checks per the agreement to extend the lease. No one cashed the checks.
Again, I remain optimistic, perhaps naively, about oil and nat gas in this country and worldwide. And fear none about any of my posterity facing empty reservoirs.