Thanks for the thoughtful reply Boys1. Let's put some graphs to...

Thanks for the thoughtful reply Boys1. Let's put some graphs to that.

Boys1>The Nat gas price has trebled but actual gas output remains almost where it was this time last year.
The amount of gas production (see US gas production graph) Seems to be going up. The only recent production fall was the start of covid.

Boys1> and they are rapidly running out of DUCs
The DUC (The drilled but uncompleted wells ) has dropped from a high of about 8,800 to 4,300. But that number is flat lining. I assume because drilling has caught up. Could it be that if the price of gas hit $10 they could accelerate the production of gas by taping the remaining 4K of DUCs? After all gas is hard to store. Why not save the DUCs and complete as dictated by price. Quite a short delay. With the industry catching up in the summer with an elevated rig count.

Perhaps you are right. The rig count is flat lining below the pre-covid rate. Perhaps they are constraint bound. In which case a hard winter would result in high prices.

The badger view
I don't think the fracking industry wants to bust a gut in over producing to gain market share and run at a loss again. So, it seems reasonable to reduce the DUCs but hold some in reserve, in case of a price spike in winter. Profit seems to be their guiding star not excessive production

In summary the Frac RIG count and DUC counts are both flatlining. Which seems to suggest some sort of equilibrium has been reached. Are we in the new normal? Where it is profitable to drill for oil, but not obscenely so and other prices just need to catch up with inflation at 10%? A drop of oil to $70 would just result in the US strategic reserve being refilled and possibly an opec+ reaction, pushing oil back up to $90. One thing is for sure. With the EU constrained in gas flow and their willingness to burn oil to provide electricity. I don't see oil world wide prices dropping much this northern winter.

Hewi> If it stays above $6 and the $AUS at 62 I don’t really care.

Quite. The question is. Is this the new normal? and If so is BYE a profitable concern with oil prices at $80 and gas at $5? Google is telling me that the BYE has a PE of 4.25 with OEL with a PE of 2.95.

Sentiment changed to buy.

All disclaimers. Badger is off to the bottle shop. To buy some, to be, empty bottles.


The Rig count rate - Flat lining

https://ycharts.com/indicators/us_oil_rotary_rigs


US gas production - going up


(source https://www.eia.gov/dnav/ng/hist/n9050us2m.htm)

Price of natural gas - bouncing up and down


https://tradingeconomics.com/commodity/natural-gas


DUCs - Flat lining at above 4K



https://en.macromicro.me/collections/19/mm-oil-price/22350/us-drilled-but-uncompleted-wells