Dallas Fed: energy prices recover, natural gas does not

The Federal Reserve Bank of Dallas outlined the mixed signals out off by the nation’s energy sector, reporting that while oil and gas prices both have rebounded from lows, oil still trades at a premium on an energy content basis

Oil prices have been at about $70 per barrel for two months, up more than 50 percent this year but still 30 percent below 2008 levels. Meanwhile, natural gas continues to skid. As of Oct. 8, the price of oil was about 16 times that of natural gas, compared to an average energy content parity of six times. The highest ratio was reached in late September when it touched 30 times, according to the bank.

“Plentiful supply and weak demand for natural gas have led to relatively weak prices. Increased gas production from shale plays is being met with tepid industrial demand due to the recession. The result has been above-average injections into inventory. After adjusting for seasonality, gas inventories are at their highest levels in 15 years and approaching capacity limits,” according to a report by Jackon Thies, a research assistant, and Mine Yücel, a senior economist and vice president in the Federal Reserve Bank of Dallas’ research department.

Range provides 3Q production update

Range Resources Corp. reported third quarter production volumes of 437 million cubic feet per day on average, a 13 percent increase compared to the same quarter in 2008 and the company’s 27th consecutive quarter of sequential production growth.

The Fort Worth-based natural gas exploration and production company, which of late has been increasing its activity in the Marcellus Shale of the northeastern United States, drilled 128 wells during the quarter and is operating with 15 rigs, according to an October 14 operations update. Marcellus Shale production currently exceeds 80 MMcfe with a target of about 100 MMcfe, with 77 wells having been drilled to date and 54 in production. Another 20 horizontal wells are expected during the fourth quarter.

Range Resources also continues to drill in the Barnett Shale; production averaged 123 MMcfe per day during the quarter.

Commenting on the company’s sale of its Fuhrman Mascho Field assets in West Texas, company Chairman and CEO John Pinkerton said the “sale proceeds, coupled with our operating cash flow should more than fund our 2009 capital spending program. Conversely, our excellent drilling results are more than making up for the production we gave up in the sale.”

Range Resources will report its third quarter results on Oct. 21.

Pickens chides U.S. for imported oil

T. Boone Pickens continues his push for a new energy policy, saying in a recent statement that the United States’ dependence on foreign oil shows no signs of diminishing.

The U.S. imported 63 percent of its oil, or 357 million barrels, in September, according to the Energy Information Administration, a division of the U.S. Department of Energy. That amounts to $25 billion, or $573,770 per minute, sent to foreign governments, by Pickens’ calculations.

“Continuously importing 60 to 70 percent of our oil each month is a major national security risk,” Pickens said in a monthly statement. “On an annualized basis, we’re sending almost a quarter of a trillion dollars to help the economies of Saudi Arabia, Nigeria and Venezuela instead of sending it to the economies of our own states abundant in natural gas – the only immediately available domestic fuel alternative. Americans can’t afford to be distracted by falling gasoline prices.”

The Dallas resident and energy industry billionaire again offered his support of the NAT GAS Act of 2009, introduced April 1 in the House of Representatives, and the Senate’s equivalent, introduced in July Senate Majority Leader Harry Reid and Sens. Robert Menendez, D-N.J., and Orrin Hatch, R-Utah.

“Taxis, 18-wheelers, municipal and school buses, state and municipal cars, express delivery trucks and utility fleets are all prime candidates to take advantage of the NAT GAS Act,” Pickens said. “We must get on our own resources.”

Dallas firm conducting pipeline,

terminal studies

Dallas-based HSB Solomon Associates LLC is conducting its annual pipeline and terminal studies to outline ways in which energy companies can improve efficiency, measure progress and maintain reliability.

The performance-improvement company is forming its 2009 Worldwide Liquid Pipeline and Terminals Comparative Performance Analysis, which includes data on more than 50 pipeline companies representing 250 pipeline systems worldwide and more than 30 terminal companies representing 200 terminals.

“Solomon’s normalized data enables study participants to chart their performance against the rest of their industry – whether their pipelines carry refined products, crude oil, natural gas liquids, or petrochemicals, and whether their receipts and deliveries are by marine, pipeline, road, or rail,” said Hank Brolick, the company’s vice president of pipelines, in a statement. “We enable participants to accurately measure asset performance, providing a starting point for optimizing maintenance programs, personnel efficiency, energy costs and other aspects of operations.”

jtronche@bizpress.net.