This is what we have been waiting for – rising gas prices! Quietly, natural gas prices have started to rise four to seven months ago from below $1.75 per MCFG, to over $3.00 per MCFG today. One penny at a time, but quietly an increase from the low of roughly 71% in value per unit. Now, for the first time in a awhile, we are above $3.00 an MCFG in trading today!
I see this push for higher prices to be a good sign and a stable pricing structure. We should see natural gas prices possibly rise to the mid $3.50 per MCFG range. This may be short lived (6-12 months) as U.S. energy producers respond to a more favorable pricing regime. These producers, who see the price for natural gas rise, will open up their existing wells at the wellhead, turn wells on line that have been already drilled, but waiting for higher prices for a completion attempt. This does not even take into consideration the new wells that can be drilled, and brought on line in a very short period of time in response to the increase of prices. These producers can capture their flush production in the first few months of output with prices above $3.00 per MCFG.
It is very good news for our Gulf of Mexico midstream business, and for those of us drilling the Cholpe, the Labokay, and the Tyng prospects Eckard Enterprises has funded and are funding now for yearend drilling.
The election means nothing but paralysis for those with uncertain plans. One thing that is certain, do nothing about your Federal income taxes, and you lose 35-42.8% of your income above $300,000. Oil is between $40 and $50, gas is on the rise, and what we are investing in works even at $30 oil and $2.25 gas.
So, let’s go! Buy and build your reserves now while drilling is cheap, and prices are stabilizing and making moves upward.