The Range Deal
With the Range’s planned purchase of Memorial Resource Development, one has to wonder if the deal will cause Range to shift some of its attention away from the Appalachian Basin to a section in Louisiana called the “Cotton Valley.”
Range and other operators in the Appalachian Basin are facing challenges to many of their midstream projects. These delays are not allowing operators to maximize the profit potential. In fact, the price for NatGas in the Basin is up to 25% below market prices.
Another reason for the Range’s acquisition is a recent phenomenon occurring in the oil and gas industry which is applying new technology to oil wells many of which were gushers. For instance, EOG Resources on a recent conference call discussed its success of using enhanced oil recovery to shale wells. I guess the Saudis move to drive down prices has forced many operators to use American technology to find new ways to drive down operating costs.
The Bottom for Oil
The price increase in oil of the last couple of weeks has caused many analysts to issue projections for oil to get to $50 a barrel fairly soon. They attribute two reasons for their change in the forecast. First, some analysts feel that the excess supply of oil has just about disappeared and supply and demand are more in balance. Second, disruptions in Nigeria and Venezuela may last longer than initially thought.
The price of oil has moved nicely since its low of $26 in February to $47 today. That’s an increase of 81% which hard to believe. Since this latest move upward, you do not hear any analyst forecasting a return to lower prices.
Stay tuned. How quickly will we get to $50 a barrel?