One major opportunity to acquire natural gas wells is by working with the banks to purchase distressed assets.
An asset can become distressed for a number of reasons that have little to do with the ability of the asset to generate revenue from natural gas production.
When an operator can’t afford to operate a natural gas asset, oftentimes you can purchase the gas wells at a discount and revamp operations with a relatively small capital infusion.
This is a very little understood opportunity that is often overlooked. To do so would be a mistake in your natural gas investing strategy.
Oftentimes, major companies will drill a natural gas asset until it can no longer be produced at the level necessary to sustain billion dollar valuations on a public stock exchange.
That doesn’t mean that other, smaller companies can’t come in and utilize the geologic data to be very successful at a smaller level than a billion dollar plus publicly traded company can be in a particular asset. It’s a unique opportunity not to be overlooked.
Public companies have to allocate their resources solely to areas that can replace the reserves that are being drained. They can’t operate a natural gas asset in a micro-economic perspective. Major companies have to be concerned with a macro-economic strategy. They can’t focus on draining an area completely dry. They have to move on to other areas that can replace their old production, even if there is still a substantial amount of natural gas that can still be produced very profitably from an asset.
This creates strong opportunities to realize value in known natural gas fields.
If you have an existing well that’s already been drilled to total depth, you may have an opportunity to obtain additional production even if it appears to be tapped out.
Sometimes there’s a mechanical issue with the well that just needs to be fixed and natural gas production can be increased.
Other times, a formation can be re-fractured using an inexpensive vertical fracturing operation to obtain substantial increases in natural gas production. So, you want to be aware of this opportunity to obtain a strong return on investment without having to pay the bulk of the costs of a well, drilling to total depth.