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January 18, 2012 
Sutherland LTIle

Plunkett Research CEO Jack Plunkett says the natural gas market has never seen such a frenzy of leasing, drilling, and acquisitions in an environment of record low prices. Despite an enormous supply, drilling is having a hard time slowing down. (Once you get ahead of steam, you can't just stop—just ask Newton... or Pandora's box.)
Jack has his finger on the pulse of the energy biz, so we caught up with him at a Starbucks in Highland Village last week. He's holding a copy of Plunkett’s Energy Industry Almanac 2012. (At 751 pages, it’s great for getting in a light weight lifting workout.) He says natural gas prices are unbelievably low ($2.66 when we looked yesterday) and could even get a lot lower because supply is going to increase dramatically this year. He says drillers have spent big money and negotiated for very hard-to-get leases, which have deadlines. If companies don’t start drilling by a certain time, they'll lose their lease. Companies must validate their wells, though the lease may or may not call for producing it or just producing a minimal amount.
Sutherland Mini
Problem No. 2: Companies have looked at the economics of not drilling in light of the fact of having invested to get their rig, equipment, and experienced fracking crew at the well site. Calgary-based gas giant Encana Corp recently said it has lost interest in the commodity and is focusing its billions in capital on oil and gas liquids drilling and away from dry gas deposits. This is the first time in a decade that gas has been this cheap in the winter heating season. Couple that with milder temps and drilling for gas becomes a money loser. Jack says private and publicly held independent companies are laying off part of their bets on foreign players. Other countries that don’t have shale production are coming into North America and buying reserves.
The Chinese, for instance, will buy all the land that's offered to them for sale. This frees up cash so the independents can move on to other plays. He says the industry needs to see a significant spike in the price to make drilling for natural gas viable. Jack also warns that a wild card will be the regulatory environment (the brussel sprouts of the industry, needed, but not beloved). Environmentalists are down on fracking and in an election year, it's a bigger political hammer. With state and federal level hearings under way, look for increases in permit costs. Also, more disclosures and treatment of water are on the horizon. This will slow production.

The Consumer Energy Alliance has set aside Oct. 20 as the second annual Energy Day Festival at Hermann Square in downtown Houston, the site of last year’s event. (It was a picture perfect day when we took this pic.) CEA prez David Holt says the 2012 Energy Day Academic Program can be found on its new website. The year-long initiative includes six citywide, energy-related competitions aimed to motivate, challenge, and inspire young minds to seek careers in science and technology. This year’s program kicks off Feb. 18 with the HoustonWorks USA & Schlumberger E2 Engineering Competition. For more info, click here.

Swift Worldwide Resources Angola director Terry Eaves and CEO Tobias Read hand Angola Universidade Metodista de Angola (The Methodist University of Angola) vice chairman Pedro Sebastiao and board member Sabino Paulo Pinheiro a check for $462,936 on the school’s campus in Luanda, Angola. The donation will help replace two generators, cables, and control boxes that were destroyed in a recent fire. Tobias says the generators will make studying possible even during frequent power outages.
The average depth of a frack well is more than 7,700 feet (many thousands of feet below fresh water formations). This is about six Empire State Buildings or 1.5 times deeper than the deepest part of the Grand Canyon. Send your facts to greg.miller@bisnow.com.
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