US shale producer Southwestern Energy are typically agile in dealing with the changes in shale. Shale production started out as unconventional and expensive. It''s rapidly becoming the new normal, and drill enough wells and learn from mistakes and last year's expensive $6 gas price that was given as the cost of new gas is adjusting to market realities.
Steven Mueller, chief executive of Southwestern Energy, said in an interview that natural-gas producers are on a steep learning curve not unlike the early days of the oil boom, when wildcatters discovered huge new deposits of hydrocarbons. "You have to keep fine-tuning to learn how to get the most production," Mr. Mueller said.
Southwestern, which celebrated the five-year anniversary of its first production from the Fayetteville Shale last week, began by drilling straight down into the rock formation and over time improved its technique. It now drills more than three-quarters of a mile in distance laterally through layers of rock, which it says has allowed the company to triple its average output per well.The time it takes to drill a well has also declined to 11 days from 17 days over the past few years. The company can now keep up its drilling pace with fewer rigs, while keeping the cost of drilling more intricate wells relatively flat.
Other natural-gas producers have had similar results. Devon Energy Corp. reported that it drilled a well in nine days in Texas's Barnett Shale during the second quarter, a feat that used to take weeks.
The conventional wisdom indicator that natural gas bulls were pointing to earlier this year was the Baker Hughes Drill Count. Declining drill counts were signs, so the theory went, that production would fall and prices would rise. There goes that theory when drills do in days what used to take weeks, drills cover more area, well output triples and the hit rate approaches 100%.
Using various technologies that goes over our heads, but is far more effective, gas drillers are losing religion:
In the shale plays, the traditional technique was characterized as ‘pump and pray.’ This meant that operators often made their best picks for likely perforating targets based on less than scientific methods—to put it politely
Meanwhile at Seeking Alpha, the Masters of the Universe traders are conceding defeat:
Natural Gas: Worst Investment Ever?
And in the comment section
Virtually all natural gas storage facilities in the country are either full or locked up by hedge funds, and it is impossible to export the stuff. Many shareholders have recently found religion, praying for a cold winter to balance out supply and demand.
And if we get a warm and wet winter as the UK Met Office predicts? No matter. Gas will still be in just as massive a glut coming out of the winter as entering it.
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