Report, Prices and Deals Energize Natural Gas Industry

Great news for the oil and gas industry keeps pouring in. Here are three for you.

"Crude-oil futures settled at a 17-month high as data showing a rise in U.S. gasoline inventories failed to stop the oil market's latest surge," writes Brian Baskin in "Crude Climbs to 17-Month High" in the March 31, 2010 issue of The Wall Street Journal. "Light, sweet crude for May delivery settled $1.39, or 1.7%, higher at $83.76 a barrel on the New York Mercantile Exchange." After publishing this article, prices climbed further to almost $87.

"The 12-nation group boosted its number of oil and gas rigs by 8.4 percent in January and February, the biggest two-month gain since June 2007," writes BusinessWeek in "OPEC Expands Oil Rig Drilling the Most Since 2007 (Update 1)" on March 15, 2010."The Energy Department is preparing to make sweeping revisions to its U.S. natural-gas production data after finding it has been overstating output, raising new questions about the government's collection of energy information," writes The Wall Street Journal in "U.S. Natural-Gas Data Overstated" on April 5, 2010.

The Department of Energy Natural Gas Report

The flawed methodology works in favor of the oil and gas industry because it means the supposed surplus of natural gas won't be as large as originally thought. Because of the high numbers, natural gas prices were at a seven-year low.

When the Department of Energy corrects its data, we should discover that supplies are much lower, which will drive up the price of natural gas -- significantly. In fact, after this article ran, natural gas prices bumped up 6 percent. DOE will use data that's six to 18 months old instead of the previous two to seven years old.

On top of all this, gasoline inventories are unusually high for this time of the year, a time when the economy still trudges along. Based on this, don't you think the prices are ideal and will remain the same or get better? If yes, it should make natural gas projects more viable.

Partnerships for Independent Producers

Deals continue to flourish! We've mentioned Exxon's deal with XTO, Devon's selling assets to BP and France's Total S.A. buying interest from Chesapeake Energy Corp.

Independent oil and gas producers continue to build partnerships or to sell land to get the needed working capital to keep drilling, prevent leases from expiring or focus on certain acreages. Furthermore, with natural gas prices becoming more constant, investors feel more comfortable pursuing natural gas deals.

Making the latest deals are Petrohawk Energy Corp. and BP. Petrohawk plans to sell its Louisiana field interest for $320 million to gain capital for reinvesting in Eagle Ford and Haynesville shale plays. BP has a $160 million deal in the works with Lewis Energy Group for 50 percent of Lewis' 80,000-acre stake in Eagle Ford shale. The moves by Exxon, ConocoPhillips, BP and Total SA once again cement big oil's interest in natural gas and energy companies that came about advanced technologies in horizontal drilling.