US shale companies improve pure fuel manufacturing as futures sign extra income. From Reuters
© Reuters. FILE PHOTO: A view of a well location on the natural gas-rich Marcellus Shale Formation in western Pennsylvania outside of Union City, Pennsylvania
By Jennifer Hiller and Scott DiSavino
HOUSTON / NEW YORK (Reuters) – Higher prices for 2021 and an ongoing flood of US shale companies prompt US shale companies to crank up gas drilling and production.
Shale producers are increasing their spending on natural gas, a change from the past, and are forecasting a 45% increase in gas prices next year compared to a 15% increase. The shift is a reminder of the Organization of Petroleum Exporting Countries meeting this week on how shale is moving fast in response to price. The OPEC group is considering reducing oil production restrictions from January 1st.
The largest US shale oil producer, EOG Resources (NYSE :), announced this month that it will begin selling gas from 15 new wells from a newly discovered field of 21 trillion cubic feet of gas next year. Continental Resources (NYSE 🙂 recently switched to oil-based gas rigs in Oklahoma. Apache Corp. (NASDAQ 🙂 announced this month that it will complete three wells in Texas after US gas production increased 15% in the second quarter and 6% in the same period last year.
“Demand is still pretty robust. The supply of capital is starved,” said Christopher Kalnin, general manager of Banpu Kalnin Ventures in Denver, who signed a purchase agreement last month Devon Energy (NYSE 🙂 natural gas plants. Banpu Kalnin has secured around 65% of its gas production for the next year.
The number of US rigs for natural gas, an indicator of future production, has increased 13% to 77 since July. About a quarter of all active US drilling rigs drill for gas, up from 16% last year, according to services company Baker Hughes.
At the Haynesville gas field in Louisiana and Texas, the number of work plants has increased 25 percent since July. Oil rigs also rose 8% at Marcellus, the largest US gas field.
HIGHEST IN TWO YEARS
Gas prices could rise 45% to an average of $ 2.94 per million British thermal units (mmBtu) in 2021, down from $ 2.03 this year, analysts predict. That would be the highest annual average since 2018. [NGAS/POLL] Summer 2021 prices could hit $ 3.50 per mmBtu, up from $ 2.84 per mmBtu on Friday, according to Bank of America (NYSE :).
The improvement in prospects will be helped by the expansion of liquefied natural gas (LNG) shipments in the US. That month, LNG exports surged above pre-COVID-19 levels and averaged 8.4 billion cubic feet per day in 2021, up 31% from 2020. This emerges from the latest forecast by the US Energy Information Administration.
The producers have doubled their natural gas hedges since March and set prices for future production. According to financial services company Raymond James, they hedged 53% of their gas volume over the next year versus 43% of their oil.
Natural gas “wasn’t hit as hard as crude oil by the COVID-19 pandemic,” said Bernadette Johnson, vice president of data provider Enverus. “For those with some diversity in their fortunes, it can help them weather the storm.”
EOG’s gas wells in the new area are as profitable as the best oil wells. Future drilling there after 2021 will be “based on market conditions,” said Ken Boedeker, executive vice president.
GAS SHARE CLIMBING
Gas prices benefit in part from cuts in oil wells that cut associated gas or gas produced as a by-product of oil production. The decline in related gas has led to the current rally in gas prices, said Eugene Kim, an analyst at consulting firm Wood Mackenzie.
The price rally has boosted stocks in natural gas-focused shale producers. Range Resources (NYSE 🙂 is up 65% this year, EQT (NYSE 🙂 48% and Southwestern Energy (NYSE 🙂 Co is up more than third place. In contrast, the SPDR S&P Oil & Gas Exploration & Production (NYSE 🙂 ETF was down 39% through Friday.