Comments From A Reader Deserve A Stand-Alone Post -- August 5, 2021

The natural gas story absolutely fascinates me. 

In response to a number of recent posts on the US natural gas story, a reader who knows much more about this than I do sent me a couple of notes, again, which are very, very good.

These notes came a few days ago, but so much was happening, I purposely delayed posting them so they (the notes) wouldn't get lost in the shuffle, as they say.

Here are the two notes.

First, August 4, 2021, "regarding northeast gas supply / Algonquin Citygate Price":

I just popped over to the New England ISO site and saw that the June wholesale electricity price averaged $36/Mwh with natural gas pricing at $2.81/mmbtu at the region's 4 tolling connections. 

This is a moderate electricity cost and a low natural gas price. Natural gas plants provide 60% of New England's power.

Looking ahead, that $14/mmbtu at Algonquin Citygate (a major tolling point) is over double last year's cost and almost 5 times June's cost.

Furthermore, a referendum in November in Maine is likely to stifle a much-needed transmission line from Quebec (1,100 Mw Clean Energy Connect).

Like you, I have distanced myself somewhat from New England's ongoing 'energy drama'. 

That said, even a moderate winter will have very high electricity prices. 

If extended cold snaps occur, those folks will face some precarious situations vis a vis the availability of electricity. The looming high cost is already baked in.

The second note, August 4, 2021, "regarding the Permian and Shell's divestiture":

From what I have been understanding, especially after poring through Liberty's June, 2021, 118-page, Investor Presentation, future, profitable Shale production will reside in the hands of the Big Boys. 

Economy of scale will not only lower costs, but the higher quality service companies (such as Liberty) will command higher pricing for their services. 

In addition, the extended  (15,000 foot/20,000 foot) laterals which are so common in the Appalachian Basin are increasingly appearing in the Permian at the 12,000 foot lengths.

Land consolidation should enable routine 15,000 footers for the companies who are able to finance the large upfront capital to realize the much higher ultimate returns. 

Exciting times in the Oil Patch.

Different topic ... Continental's COO - Jack Stark - said in his introductory comments st the 2Q21 Conference Call the other day that 'exploratory opportunities' were underway that could greatly increase CLR's size. 

Could possibly be the forgotten Tuscaloosa Marine Shale. 

A tiny Australian company has drilled 6 wells there with moderate success. 

Could be interesting.