HomeNewsU.S. natural gas producers eye further output cuts as prices sink

U.S. natural gas producers eye further output cuts as prices sink

8/7/2024

U.S. natural gas producers eye further output cuts as prices sink

Major U.S. natural gas producers are preparing to further curtail production in the second half of 2024, after prices sank nearly 40% over the past two months.

Henry Hub gas futures have dropped to around $2 per million British thermal units (MMBtu), while in West Texas, Waha prices have turned negative a record number of times so far in 2024. Prices fell as demand softened following cooler than expected temperatures. Supplies had expanded meanwhile, as some producers lifted production during 2Q after prices climbed some 47% in April and May.

EQT, one of the top gas producers in the U.S., has embedded around 90 Bft3e of strategic curtailments this fall, which the company will carry out if the market remains depressed, CFO Jeremy Knop said during the company's second quarter earnings call.

Houston, Texas-based Apache is also set to curtail 90 MMft3d of gas in the third quarter, its CFO, Stephen J. Riney told analysts in an investors call last week.

Apache curtailed 78 MMft3d of gas production in the second quarter, in response to pricing extremes in the Permian Basin, the company said in its 2Q earnings report.

Chesapeake Energy, which will be the largest U.S. gas producer after it completes its merger with Southwestern Energy, plans to defer some well completions while the gas market is weak, biding its time until supply and demand imbalances correct, the company said last month in its second quarter earnings report.

Rivals Antero Resources Corp and EGO Resources are opting to do the same, they said in earnings reports.

Chesapeake's move to defer well completions makes sense as it can hold out for an expected rise in LNG demand to properly kick in and buoy prices, Robert Wilson, vice president of analytics at East Daley told Reuters.

Meanwhile, shale producer Coterra Energy had reversed some curtailments at the end of the second quarter, but is bracing for more reductions.

"We are prepared to make further cuts as some of our summer sales commitments roll off in the shoulder season," said Blake Sirgo, senior vice president of operations for Coterra in the company's 2Q earnings.

U.S. natural gas output will average about 103.3 Bft3d this year, the U.S. Energy Information Administration (EIA) said in its August edition of the Short-Term Energy Outlook report.

That compares with 103.8 Bft3d produced last year, and is a slight downgrade from a forecast of 103.5 Bft3d in the July edition of the report.

 

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