Oh My Sweet Atlas

At the Master Limited Partnership Investor Conference in NY this morning, Atlas President & COO, Richard Weber, discussed the "Sweet Spot" position his company has in the Marcellus shale in southwestern Pennsylvania. The fundamental reason is that the shale in the area is characterized by a very desirable .6 pressure gradient which is providing the verticals that they've completed with the strongest recovery numbers in the entire play. He also noted that coincident with that "overpressure" is a greater degree of natural fracturing. Atlas, a long time area producer with 242,000 acres in the four county area is also very much in the sweet spot by having acquired those leases well before anyone had even heard the name Marcellus (and even a few print jocks in the area still can't spell it). With 60 verticals under their belt, Weber said their experience gives them a very good understanding of the acreage and clearly delineates their position. Add it all up and you get 4-6 Tcfe of proven, recoverable reserves.

Tactically speaking, Weber reiterated from the last conference call that the 1600 miles of 8" & 12" gathering systems they have built over the last several years are exactly the type one would build for a Marcellus program. They are scalable and tied in to a 6.5 Bcfd Texas Eastern line which runs through the heart of the region.

Is Weber alone in his thinking? I hadn't heard this before but he also said that over the last few weeks, they've met with Tennessee, National Fuel, Dominion, and Equitable; all of whom want to build more high pressure transmission capacity in the area.

Full Audio at http://phx.corporate-ir.net/phoenix.zhtml?c=202140&p=irol-EventDetails&EventId=1857002

Drillbits

Up from the Ground Come A.....

Somerset County is the place to be...........farm livin' is the life for.....(uh oh..wrong show!) Well, somehow, I don't think either Jed or, certainly not, Lisa would mind much. Seems the landmen are crawling all over the courthouse and signed 1400 leases in the last 17 months. Not all of the activity is on the PA-NY border.

Full Story at http://www.dailyamerican.com/articles/2008/05/21/opinion/editorials/editorial664.txt

Carrizo Says Me Too

Carrizo Oil & Gas announced today the issuance of $275mm in convertible debt. Carrizo intends to use the estimated $268.8 million of net proceeds from the offering (net of underwriting discounts) to repay in full the outstanding borrowings under its second lien credit facility and to fund, in part, its capital expenditure program for 2008, including drilling and land acquisition programs in the Barnett Shale, the Marcellus Shale and elsewhere, and for other corporate purposes.

Full Story at http://biz.yahoo.com/ap/080521/carrizo_oil_gas_offering.html?.v=1

Drillbits

Says Chesapeake, "Yeah, And I'll Raise You $700 Million"

Just following up on Aubrey McClendon.......On Monday, May 19, Chesapeake Energy announced offerings of $1.2b in notes and convertibles. Yesterday, as announced, in addition to pricing the $800mm of 10 year notes, they also priced the $500mm of contingent convertible paper but then, presumably on the way to the bank, decided to change it to $1.2b. Aw shucks....what the heh...we'll find somethin' to do with it!

Carrizo, Chesapeake, Range, Atlas, Equitable, and a few smaller operators have raised over $3.5 billion, mostly debt, in just the past 3 weeks and they've all mentioned the Marcellus shale as one of the uses for the cash.

Has the street has found the new subprime? Anybody seen Mozillo?

Full Story at http://biz.yahoo.com/ap/080520/chesapeake_energy_financing.html?.v=1

Let the Good Times Roll

Considering today's Sarbanes-Oxley world of CEO tongue minding, recent shareholders' meetings for XTO and Range Resources produced some unusual prognostications.

“XTO simply rocks. If you work here, you better grab hold,” Chairman Bob Simpson said. “We’re going to spend a lot of capital. We’re going to be active, and we’re staking our claim”

“The world is into a period when oil is going to be rationed by price. India and China want their share,” Simpson said, addressing an audience of more than 200 at the Fort Worth Convention Center. “I’m not sure we can stop this train,” Simpson said, also noting, “I suspect prices will tend to go higher for natural gas” as well.

Range President, John Pinkerton, noted “I for one believe we are in a high-priced environment and are going to be there for a while,” he told a small group at the company’s headquarters in downtown Fort Worth. If in the past the United States and the Organization of Petroleum Exporting Countries dominated the market, Pinkerton said that today “there’s still one supplier, OPEC, and now there are three consumers: the United States, China and India.” Pinkerton said environmental concerns could also boost the standing of natural gas, which he said has a much smaller carbon footprint than crude oil or especially coal. “There is no such thing as clean coal,” he said.

Full Story at http://www.star-telegram.com/business/story/655207.html

Drillbits

Natural Gas Heading for a Double?

The general rule of thumb relationship between the price of one barrel of oil and one mcf of natural gas is 6 to 1. Based on the btu's available to power generation plants from each energy source, if oil is trading at $60/bbl, then the equivalent cost of using natural gas would be $10/mcf. Seasonal supply and demand factors always skew this price relationship somewhat but because U.S. power generators are the largest users of natural gas and signifcant users of heating oil, the relationship tends to revert to the 6:1 mean as the pricing disparities drive demand to one or the other.

This morning, crude oil futures have set another record by crossing above the $130/bbl mark yet, natural gas is trading at $11.50/mcf. The old "rule of thumb" says that either natural gas should be $21.66, or oil should be at $69. The difference this time around, however, is that oil demand is coming from outside of the old price dynamic; namely, the rest of the world, And, further, supplies cannot keep up.

It doesn't sound like oil is heading to $69 anytime soon. With peak power demand coming in the months ahead...........can you say $20 natural gas?

Early yesterday, investor T. Boone Pickens told CNBC he expected oil to hit $150 this year because supply isn’t keeping pace with demand. Very interesting interview at: http://www.cnbc.com/id/15840232?video=748353630&play=1

Marcellus Looking Better to Epsilon

Epsilon Energy Ltd.is pleased to announce that it has received approximately $6.26 million dollars from the sale of non-core and unproved leasehold covering its Swan Creek and Bootleg projects in Ohio. An additional amount of up to approximately $450,000 may be realized if certain title issues are cleared within the next 120 days.

Mr. Fred Zaziski, Epsilon's President and CEO stated "We have been afforded the opportunity to cash-out some of our non-core and unproved acreage at a substantial profit. We will now be able to re-deploy the proceeds of this transaction into our horizontal drilling program in Pennsylvania which is focused on the Marcellus shale, where we believe we will achieve a substantially higher internal rate of return, as compared to the Lower Huron and Rhinestreet shale gas formations

Full Story at http://biz.yahoo.com/iw/080520/0398991.html

Chesapeake Raises $1.3 Billion - More Marcellus?

Late yesterday Chesapeake Energy announced the placement of $500 million of contingent convertible senior notes due 2038 and $800 million in senior notes due 2018. Chesapeake intends to use the net proceeds from the offerings to fund the redemption of its 7.75% Senior Notes due 2015, to repay outstanding indebtedness under its revolving credit facility, and for general corporate purposes.

Interestingly, according to the 12/31/07 10-K filed in February, the indebtedness under the 7.75% notes being redeemed is $300 million. leaving $1 billion for general corporate purposes and/or reduction of the outstanding credit facility. As of 12/31/07, Chesapeake owed $1.95 billion under the $3.5 billion revolver. Considering what are very favorable interest rate terms on the revolver, it would seem that that these funds are destined for investment. More Marcellus perhaps?

Full Stories at http://phx.corporate-ir.net/phoenix.zhtml?c=104617&p=irol-newsArticle&ID=1147842&highlight= & http://phx.corporate-ir.net/phoenix.zhtml?c=104617&p=irol-newsArticle&ID=1147826&highlight=

Quest Expands Marcellus Acreage in SW PA

Quest Resouces announced the signing of a letter of intent between its New Ventures group and a private company that would expand its Marcellus shale position by 30,000 acres in Pennsylvania. New Ventures will now have rights to develop 52,000 acres in the southwestern part of the state.

Full Story at http://money.cnn.com/news/newsfeeds/articles/marketwire/0398327.htm