Recently, I attended the National Oil & Gas Conference sponsored by the AIPCA in Denver. It was a great conference that covered many industry issues. The supply and price of gas was a common theme that was discussed by several of the speakers. The Marcellus Shale play impact was also at the center of most of the discussions.
According to the speakers, natural gas prices are going to be low for some time. With gas prices so low, one can only wonder why the rig counts haven’t dropped significantly. Certainly, drilling to protect leases is one reason, but another big reason is technology and efficiencies in the drilling process. It takessignificantly less to drill a well today compared to three years ago. In addition, as we learn more about the longevity of Marcellus wells and their production curve, it appears the gas supply is very strong.
Another interesting discussion concerned the makeup of the different oil and gas investors. Oil is attracting public companies, while private equities are leaning more towards natural gas opportunities. Will the attraction of public companies to oil create noncore assets that will be ripe for a divesture? Several of the people I spoke to feel that this will occur in the next 12 months.
In another session, it was interesting to hear how Pennsylvania is regarded as a friendly state to invest in oil and gas properties. Living in Pennsylvania, I frequently hear people criticize Pennsylvania as unfriendly for corporate taxes and business. However, the speaker went as far as to say that even if Pennsylvania imposes a severance tax, well fee or some other tax, the proposed impact will be less than $.10 a mcf.
Below is a slide that I thought summarized how far this industry has changed in the past 10 years:
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