Drilling Ahead

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The Coming Oil and Gas Boom – Are You Ready?

Every new beginning is some other beginning’s end... Great lyrics from a pretty decent Matchbox Twenty song, and a great lead-in to what will soon be the next great Oil and Gas Boom!

Get ready, because it’s coming.

OK, so maybe this “boom” isn't starting off with a bang, more like a whimper...But I believe it has begun. The worst seems to be behind us as the recent stock market rally and rising energy prices may be signaling. Still, for us oil workers low on the totem pole, the near-term future is going to be tough. Natural gas prices seem to have hit a bottom and are signaling recovery. I am still waiting for the weekly rig count to bottom out. I thought we may have seen that happening a few weeks ago but the last two weeks’ trend has continued downward, although at a much slower pace.

I try to always put on the air of the eternal optimist (even when I have that ‘this ship is sinking’ feeling inside), Today is no different. It’s been said that Wall Street signals a recovery six months before the economy actually reflects it, and I believe this recent rally puts us there. The outlook is good, at least better than at the first of the year, and in six months we can all breathe a sigh of relief.

Each week that the rig count falls, the natural gas producers’ stock actually rises. To me, this signals that Wall Street believes that when this economy recovers and American industry begins consuming its 30% share of natural gas, there just isn’t going to be enough. The new wells that in the recent past were being drilled at a record pace and still struggling to keep up with our thriving economy were not drilled over the last nine months or so. The recent horizontal wells with a decline curve of around 70% in their first year of production most likely won’t keep up with the demand. When this new boom hits full swing, I look for natural gas prices to meet or exceed last year’s high of around $13.

Still, we have to wait that six months for the economy to follow up on Wall Street’s predicted recovery. We have to wait for the producers that are cash-strapped at the moment to refill their coffers with much-needed revenue to have a cushion against the downside. Wells that have been shut in will be opened first. LNG imports that have nowhere in the world to go but here will have to be used up. Foreign economies will need to recover to create the demand needed to divert this natural gas away from the United States . When we see this happening, we will know it’s time for many of us to go back to work.

The question then will be where. Look for today’s trend to continue with the largest producers sending iron to the major horizontal plays. Arkansas, Dallas/Ft. Worth, NW Louisiana and scattered activity in the Marcellus from Pennsylvania southward will increase as these new plays are developed. Look for smaller producers without the deep pockets for these new expensive plays to continue drilling conventional wells in the usual areas. When oil hits $70 a barrel I think we will see activity take off to some extent in the Bakken, slowly at first as these cash-poor companies flow some of what they already have to generate some income to endow future exploration.

How far off is all this? Well, it has always been “Boom or Bust” in this industry with very little middle ground, and I think this “bust” has about bottomed out. I am guessing rig counts will stabilize in the next few weeks. I don’t look for any major increases until late this winter, and activity ramping back up slowly in early 2010. I wish I had a better prediction to share, but hopefully this bust will be short-lived and we will soon have it behind us.

Drilling Ahead-The Oil & Gas Space

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Tags: activity, boom, demand, discussion, economy, gas, horizontal, natural, oil, producers, More…recent, rig

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Replies to This Discussion

question does anyone know where the next boom is I do the construction cleaning for all oil companies looking to get a jump start can anyone offer information?

in ohio

I hear a lot of talk around southwest kansas and north Oklahoma

thank you can any of you point me to the name of the town so I can get a head start that way after christmas

woodward ok,perryton tx,and liberal ks will put you in the center



you make it there,canadian,wheeler too theres no housing or motels bring a rv


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