Why is natural gas better than oil?
Gary Evans, Chairman and CEO of Magnum Hunter Resources Corporation (NYSE: MHR) is certainly one smart operator. With over three years of coal and oil research knowledge under his buckle, Evans has a multi-billion buck trophy to prove it. In 2005, he marketed Magnum Hunter Resources, Inc. (MHRI) to Cimarex for $2.2 billion. He took many years down, then took at MHR in '09.
On September 24, 2014, Evans announced toward world that Magnum Hunter had discovered what's nevertheless the largest producing shale really ever. It’s a gas well in Tyler County, West Virginia, additionally the preliminary price of propane manufacturing ended up being 46.5 million cubic foot of fuel. On a per-barrel of oil equivalent, that might be about 8, 000 barrels of oil per day.
Evans determined in 2012 that'll contour the direction of Magnum Hunter Resources. Throughout a two-year period, MHR liquidated over $700 million of these oil wells while costs were at their particular top, increasing numerous capital that could promptly be switched around and purchased natural gas wells, especially within the Marcellus and Utica shale structures of Ohio, Pennsylvania and western Virginia. “We made a decision to concentrate totally on gas, therefore we’re 90-percent propane these days. We believe’s tomorrow for U.S. and we demonstrably have more control of that: we believe industrial need, chemical need, LNG demand continues to drive propane prices up, ” Evans informed CNBC’s Closing Bell in February. Associated: European Countries Overtakes Asia As LNG’s Finest Marketplace
Magnum Hunter also features a subsidiary midstream operation, Eureka Hunter, very often bring its pipelines right up to Magnum Hunter’s wells to transport their fuel right to market. Smart.
Based on the Energy Suggestions management, the Marcellus and Utica shale formations hold sufficient gasoline to provide America’s current fuel demands for more than a century. “Many folks compare the Marcellus and Utica to Ghawar, ” Evans says, talking about the per-barrel equivalent, suggesting the northeast could hold amazing amounts of an affordable power source. Ghawar, located in eastern Saudi Arabia, may be the world’s largest oil reserve.
What Evans is performing in northeast with gas might easily set the club for crude manufacturers various other plays round the nation just like the Bakken, Eagle Ford and Permian. Evans is drilling several wells from pad locations, a technology where one rig site can drill several well bores through the exact same proximity. In addition, Evans is drilling deeply. His Stewart Winland monster reached a depth of 10, 000 legs. Yet, notwithstanding these lengthy well bores, Magnum Hunter is profitable with propane at costs below $2.00. Oil manufacturers at some point need certainly to develop new technologies and methods to drive per-barrel removal expenses down to a comparable price. Relevant: Inefficiencies Abound In U.S. Shale
Evans big gasoline bet will be based upon more control, less overseas competitors and developing domestic and international need. Even President Obama has-been advocating propane as one of the cornerstone power sources inside the “all for the above” arrange for America’s energy future. Dow Chemical revealed last week it was spending $6 billion in new Gulf Coast production plants, laying a large bet that numerous, low priced gas will allow it to save money over offshore services.
“once you look for reserves as cheap as we can up in Marcellus and Utica, which will be certainly from a gas viewpoint the cheapest cost basin within the U.S., then we’re making great comes back, ” Evans states. “These low priced sources of energy sources are what will drive this country in to the next generation for the kiddies and our grandchildren, ” he included.
The marketplace has actually precipitously un-rewarded MHR’s stock price, plummeting it below $3.00 in the across-the-board sell-off, but Evans solidly feels traders and investors will eventually come back into exploration and manufacturing stocks, and then he is working diligently over these down times to guarantee MHR is well-positioned to give that low priced gas to meet up America’s growing energy needs.