It's Not the Prices, Stupid! It's Supply
Where once producers' biggest worry was whether they would get a
decent price for their gas, the concern now is whether they can
produce enough to meet market demands.
Tom Brown Inc. President James D. Lightner predicts prices will
remain "healthy" over the next three to five years, "solidly above"
the $3 level, yet volatile. Speaking to a Rocky Mountain Natural
Gas Investment Forum last week in Denver, Lightner said he was more
concerned about having enough supply to meet gas demand in the
"Gas production is having a real challenge. All of these
increased drilling rigs are going to be great, and we need that,
but it's not going to provide this super big gas bump that's going
to take care of all the demand problems," he noted at the
investment forum, which was held in conjunction with the 12th
annual Colorado Oil and Gas Association conference last week.
"There's a lot of people who think the Rockies have more
resource potential [than other regions]. The question is, can you
find it and make money on it? These deep basins all have huge gas
kitchens in the bottoms. In 1995, we got 95 cents. You can't do
anything with that. This stuff that's deep is expensive to go get."
Tom Brown produces coal-bed methane (CBM) gas in the Powder River
Basin at "deeper depths than anybody understands," and at expensive
If the market drops those costs would not be covered. "I'll be
the first to say if gas prices went back to $1.50 Nymex, the
Rockies would be one of the first places I think that would slow
down," Lightner said. But he's not expecting this to happen anytime
soon. "I really think that the entire U.S. has entered into an
entirely different era of natural gas prices than it's seen in the
The Denver-based independent producer also is drilling and
exploring for natural gas and oil in such places as the Wind River
Basin, White River Dome, Permian Basin and Piceance. Its production
during the first quarter of this year was 158 MMcfe/d. Lightner
anticipates the industry should be "really [be] surprised" by the
company's volumes for the second quarter.
"We have a much better quality of portfolio, a more diversified
portfolio than this company has ever had," he noted. He's also
excited about the company's prospects in Canada. "Most of the stuff
in Canada I can't even tell you about yet. But we got a lot of neat
things going on there that hopefully by next quarter we're going to
be able to talk about the specifics," he told NGI.
"If there's been some criticisms of [Tom Brown] in the past,
it's that it didn't move fast enough," Lightner said. Investors and
analysts have said, "I don't give a darn about your hundreds of
acres [in basins]. Get the gas out of it. Quit promising this
Susan Parker, Denver
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