Tag Archives: Barnett Shale

Business, Finance, Occupation & Industry

Why Quicksilver Resources' Shares Popped

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By Travis Hoium, The Motley Fool

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Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of oil and gas company Quicksilver Resources jumped as much as 41% in early trading today after announcing an asset sale. The stock settled in at a 15% gain later in the day.

So what: The company will sell a 25% stake in its Barnett Shale asset to Tokyo Gas Co. for $485 million. The money will be used to pay down debt, which has been strangling the company.  

Now what: This is progress toward management’s planned deleveraging and analysts are now looking to see if the company can do the same with its Horn River assets. I don’t think this makes the stock a buy, but gross profit has been improving and a reduction in debt is a positive sign. I’ve just seen too many mistakes by Quicksilver over the past few years to be aggressive right now.

Interested in more info on Quicksilver Resources? Add it to your watchlist by clicking here.

The article Why Quicksilver Resources’ Shares Popped originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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News, Politics, Government

Will Natural Gas Stay Cheap Enough To Replace Coal And Lower US Carbon Emissions

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By Karl Smith, Contributor Via Brad Plumber, Eduardo Porter worries that the recent decline in carbon emissions will not last Will our carbon footprint continue to shrink? The Energy Department forecasts that CO2 emissions will tick up nearly 2 percent this year and 0.7 percent in 2014, as the economy recovers. Coal use in power plants is also expected to rebound as gas prices rise from their 2012 trough. Historical precedent is not promising. The drive for energy efficiency that started in the 1970s did not continue once oil prices fell in the 1980s; among other things, American drivers fell in love with S.U.V.’s and trucks. In 1981, the Ford F-series pickup truck became the nation’s best-selling light vehicle. In 1986, Ronald Reagan had the White House solar panels taken down. Whether Natural Gas continues to displace coal is a complex, but for the most part it hinges on to two questions: 1) How cheaply can drillers create a horizontally fractured gas well? 2) How robust is the demand for ethane and other natural gas liquids from Petrochemical Manufacturers? Cheap Drilling Traditional oil and gas wells are a long term capital investment similar to an office building.  It costs a lot to drill the well, but you continue to get a  slow stream of profits or rents for years to come. Hence, the key issues are the interest cost of financing the well and the certainty of the stream of profits. From that perspective the swings in both energy prices and interest rates during the 1970s and early 1980s was heart-stopping for drillers. Horizontial Fracking is a bit different. The enormous pressure of the shale formation sends oil and gas gushing out the well when it is first fracked. Fracked wells have been known to gush at 100 times the initial rate of an average vertical well. However, the inherit low porosity of the shale also implies that once the initial gush dies down, the flow will become a trickle. To some old-school analysts this makes fracking seem like a flash in the pan. From an big-picture economic standpoint, however, it makes fracking less like a capital investment and more like a service. You pay X for a fracked well and you get Y in oil and gas – today.  Not 20 or 30 years from now, but right now. Or as soon as you can build the infrastructure to take the fracked products to market. In recent years that has been the bottleneck. This means that well drilling and finishing costs – not financing or the future of energy prices, becomes the major determinate. Wells either pay for themselves in terms of today’s prices or they do not. George Mitchell, the father of fracking, got well costs down to about $4 per million BTU of natural gas for fracking the Barnett Shale. That made fracking economic and started the revolution. This also implies that unless new wells are much harder to drill, natural gas prices will have a hard time staying above $4 …read more
Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

The Biggest Oil Winners in Texas

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By Aimee Duffy, The Motley Fool

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At the end of 2012, oil production in the state of Texas had reached a level not seen since the late 1990s. The state was cranking out more than 2.2 million barrels per day in December, accounting for roughly 31% of all U.S. oil production. This resurgence can present an opportunity for investors, and with that in mind today we will take a look at the five top producers in the great state of Texas.

The list
The most important thing about the 2012 list is that it did not look the same in 2011. The emergence of the Eagle Ford Shale in East Texas, and the application of horizontal drilling and hydraulic fracturing in certain segments of the Permian Basin has caused some changes:

Company

Avg. Daily
Production

Annual
Production

% State

Occidental Petroleum

116,911

42.7 M

8.0%

EOG Resources

109,776

40.1 M

7.5%

Pioneer Natural
Resources

62,507

22.8 M

4.3%

Apache

57,876

21.1 M

4.0%

Kinder Morgan Energy Partners

51,705

18.9 M

3.5%

Source: Texas Railroad Commission 

In 2011, all of these companies were on the list, but in a different order. Kinder Morgan ranked second then, but almost failed to rank this year, and no one outside of Occidental was posting production numbers over 52,000 barrels per day, let alone 100,000. Things will continue to change, no doubt, so let’s take a closer look at what these companies are up to.

The players
Occidental Petroleum is the top producer in the Permian Basin. The company has mastered the art of using carbon dioxide in tertiary recovery to increase well production by 15%-25% in certain fields. Kinder Morgan, aside from using CO2 to produce oil and natural gas liquids, sources and distributes the gas to other producers in the play. If you’re looking for a diversified operator in the Permian, that’s the company for you.

Apache is another Permian player with the potential to rise up on this list next year. The chart above reflects an annual average number for daily production, but by the end of 2012 Apache was producing 134,123 barrels per day in the Permian. While some of that production was outside of Texas on the New Mexico side, the company has really ramped up its growth in the Texas shale portion of the Permian. 

Pioneer Natural Resources is double dipping, exploiting both the Permian and the Eagle Ford for its benefit. The company is really doing it all right now, as far as drilling goes. It is focused on vertical wells in the Spraberry section of the Permian, horizontal wells in the Wolfcamp region of the same play, and of course horizontal wells in the Eagle Ford. If you include the state’s Barnett Shale, the company plans to spend about $2.4 billion drilling in Texas …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Do Investors Hate This Top-Traded Natural Gas Stock?

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By Matt DiLallo, The Motley Fool

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Natural gas exploration and production company Quicksilver Resources is a day trader’s dream. With millions of shares being traded daily, and more than 20 million shares trading hands last Friday, Quicksilver is a company the market likes to move. Not only are traders buying and selling shares of Quicksilver in rapid-fire action but many of those traders have made bearish bets on the company as evidenced by the 16.8% of its outstanding shares being sold short. 

Those taking bearish bets have to be getting nervous considering that shares are up nearly 40% in the past week. That being said, bearish themes abound and are the force driving shares down 80% over the past two years, taking the company’s market cap below $500 million. With all the heavy trading surrounding this stock let’s take a look at why its both hated and loved by traders. 

Why it’s hated
If there are two things investors hate these days its energy companies that produce a lot of natural gas and have a debt-laden balance sheet. That’s a big problem for Quicksilver as 72% of its production is natural gas and the company’s balance sheet is weighted down by $2.1 billion of debt. Liquidity concerns are a bigger problem for Quicksilver and are a big reason why shares hit a low of $1.67 just on March 6.

The combination of a high debt burden and a focus on natural gas production has been the downfall of another hated natural gas stock: Chesapeake Energy . The company seems to have provided the blueprint followed by so many in the industry, including Quicksilver. While there are a lot of similarities between the two, Chesapeake seems to be a bit further along in its plan to grow its liquids production. The company is spending 85% of its 2013 capital budget to grow liquids production to 26% of total production, while Quicksilver will still be at just 18% liquids production in 2013. Still, there is a silver lining here that investors need to keep an eye on. 

Why it should be loved
Quicksilver is well aware of its liquidity issues. CEO Glenn Darden has said that his company’s “… top priorities are to improve liquidity through asset sales, joint ventures and other measures, further reduce the overall company cost structure, and match capital spending to operational cash flow.” To accomplish this, the company plans to only spend about $120 million in capital for 2013, which is a substantial cut from the $270 million it spent in 2012. The key here is that the company has resolved to limit its spending to its expected cash flow. It’s also promised to reduce spending further if it needs to preserve liquidity. 

One way the company will accomplish this is by concluding its advanced negotiations to monetize its Barnett Shale assets with a deal. The company is considering either an asset sale or an MLP for the assets and is …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Fracking Endangered by Incessant Studies?

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By David Lee Smith, The Motley Fool

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It’s clear that, as has been the case since time immemorial, the eyes of Texas are on the oil and gas industry.

As last week wound down, a study emerged from the University of Texas predicting steady growth for U.S. natural gas production during the next few decades. That is — and this is my caveat, not one emanating from the folks in Austin — unless hydraulic fracturing becomes entombed by the stream of opposition that’s designed to thwart its progress.

Iterative studies, it seems, have become the order of the day regarding fracking, or TransCanada‘s proposed Keystone XL pipeline, or any other activity judged verboten by environmentalists.

We won’t get rid of this gas for a while
The Texas study focused on the Barnett Shale, which sits in a north Texas expanse generally surrounding Fort Worth. Funded by the Alfred P. Sloan Foundation, the study, the first to comprehensively focus on the geology and economics of shale drilling, examined 15,000 wells that have been drilled in the Barnett.

As The Wall Street Journal noted, Scott Tinker, director of the Bureau of Economic Geology at the university said at the conclusion of the study, which he helped to lead: “We are looking at multi, multi decades of growth.”

Indeed, it’s anticipated that the Barnett alone contains another 44 trillion cubic feet of natural gas, and that gas production in the U.S. won’t plateau until 2040. Many of the nation’s future gas wells will be drilled in the giant Marcellus Shale of Pennsylvania and surrounding states — unless, of course, excessive fracking runs into a generalized roadblock.

Fracking flunks at Cornell and passes at Texas
As I told Fools a couple of years ago, a Cornell University study resoundingly turned thumbs-down on fracking. The study’s leader, Robert Howarth, a professor of ecology and environmental biology, said at the conclusion of his effort: “The take-home message of our study is that, if you do an integration of 20 years following the development of the gas, shale gas is worse than conventional gas and is, in fact, worse than coal and worse than oil.” Huh?

For the next study, we return to the home of the Longhorns. Early in 2012, UT’s Energy Institute released a report that judged the environmental risks from fracking to be minimal. That clearly was not the correct conclusion in some quarters. Thus followed a cacophony claiming the existence of a conflict of interest, since Charles Groat, the former U.S. Geological Survey leader and the major domo of the study, was a paid board member of Plains Exploration and Production . For all intents and purposes, the study’s conclusions have been tossed out like Sunday’s newspaper.

However, that same environmental chorus had, not surprisingly, become mum regarding Howarth’s apparent conflicts and flaw-laden conclusions. As Forbes contributor Jon Entine wrote subsequently:

Last April the Times ran two articles in a week heavily promoting Howarth’s …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

What Sets These MLPs Apart?

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By Matt DiLallo, The Motley Fool

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While most investors these days are familiar with midstream MLPs and the generous distributions paid, far fewer are familiar with the growing number of upstream oil and gas MLPs. These companies pay the same large distributions but, instead of transporting oil and gas around the country, they’re taking it out of the ground.

Traditional exploration and production companies still do most of the heavy lifting. An upstream MLP simply buys up mature producing wells to squeeze out every last drop of oil and gas from them while distributing virtually all of the profits to investors. To help you better determine which upstream MLP you might want to buy, I’ve compiled the top reason why you’d want each company in your portfolio.

If you want to own the top dog
LINN Energy , and by association LinnCo , is by far and away the top dog in the upstream MLP segment. Though, as some might point out, LINN‘s not exactly an MLP as its true structure is that of an LLC. That aside, LINN is not only the largest company in the space that it created, but it is bigger than every one of its peers combined: 

Source: LINN Energy investor presentation

LINN‘s not just big, but it’s also the most hedged operator in the energy industry. It has hedged its natural gas output until 2017 and its oil production is hedged through 2016. This enables LINN and LinnCo to lock in cash flow to investors, allowing both companies to pay an 8% distribution. Bottom line here, if you want to earn income from oil and gas production, LINN‘s could be the safest way to play.

If you want to be paid monthly
If you want a slightly larger yield hitting your brokerage account a bit more often Vanguard Natural Resources‘ monthly distribution might be for you. Like its upstream peers, Vanguard’s lifeblood is its ability to acquire mature, long-life production. Just last week the company announced a $275 million deal to acquire oil and gas properties in the Permian Basin from Range Resources . The deal added 136 billion cubic feet equivalent of liquid-rich reserves and has an estimated reserve life of nearly 20 years. It’s a great MLP-type asset that should help Vanguard to keep its growing distribution flowing to investors. 

If you want a bit more growth
While both LINN Energy and Vanguard are known for slower growth and rising distributions, EV Energy Partners is more of a faster growth story. The company operates in less mature plays like the Barnett Shale and the Utica Shale. It also has a growing midstream business in the fast-growing Utica. Because of the focus on growth, its distribution has been relatively flat over the first few years. 

With this growth comes a lot of upside. The company is currently marketing its 100,000 acres in the Utica which could be worth upwards of $10,000 an acre …read more
Source: FULL ARTICLE at DailyFinance

Science & Technology

New, rigorous assessment of shale gas reserves forecasts reliable supply from Barnett Shale through 2030

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A new study, believed to be the most thorough assessment yet of the natural gas production potential of the Barnett Shale, foresees slowly declining production through the year 2030 and beyond and total recovery at greater than three times cumulative production to date. This forecast has broad implications for the future of U.S energy production and policy. …read more
Source: FULL ARTICLE at Phys.org