Natural Gas Prices Hits 14-Year Low – When Will it Rebound?
The price of natural gas hit a 14-year low yesterday. Ouch. We don’t normally report on the ups and downs of natgas prices because, well, because it goes up and down–all the time. Broad trends in the price we report on, but not the day-to-day vagaries of natgas prices. But we are today. Why? Because there appears to be no end in sight for these low prices. MDN editor Jim Willis lives in the Binghamton, NY area. It’s usually cold and cloudy in Binghamton in the winter–from about the end of October to mid-April. No lie. Winter is typically that long around these parts. Yesterday? Mid-60s. Today? In the 50s and sunny. We do love it–but it’s beginning to freak us out! Point: As was predicted by natural gas weather guys we heard a few months ago at a Bloomberg meeting in NYC, the weather in the northeast during this monster El Niño winter will be drier than usual and warmer than usual. Translation: We’re going to use a whole lot less heating fuel and natural gas. More supply than demand means prices go down and they stay down. And that’s just what’s happening. Traders are giving up on a cold snap causing prices to rebound, and that capitulation is reflected in the price of natural gas…
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Doug “the ax” Lawler, CEO of Chesapeake Energy, was the keynote speaker on Tuesday at the Louisiana Gulf Coast Oil Exposition (LAGCOE). Lawler became CEO after corporate raiders Mason Hawkins and Carl Icahn, the two biggest investors in Chesapeake, forced Aubrey McClendon out–out of the company he co-founded. That’s what happens when you take other people’s money. You lose control. Lawler embarked on massive layoffs and selling everything but the kitchen sink. How’s it worked out? Lawler claims the company now has $1.5 billion in cash, giving them some breathing room. Lawler had some very interesting comments at LAGCOE on the price of natural gas–where he sees it going over the next five years, and at what price his company (and other companies) can’t make money. Lawler also talked about the price of oil, oil production and Saudi Arabia’s rather bizarre behavior with respect to oil production…
It’s a theme often repeated here on MDN and in mainstream media: We need more pipelines in the Marcellus/Utica. The problem, of course, is that it’s easy and fast to add new rigs and drill new wells in nothing flat. But at some point all of those wells flowing all of that gas need larger interstate pipelines to get the gas to market–markets in New England, New York and New Jersey, the south, the Midwest, even the Gulf Coast. The Marcellus/Utica is producing more than 25% of all the gas being produced in the country–way more than we can use ourselves. We need to move the gas to other parts of the country that can use it. So new wells come online, but it takes, literally, years to build a new pipeline. Why? Mostly because government regulatory agencies grind so slowly. We have an imbalance. What are drillers in the northeast doing to address the situation? Choking back their wells so they flow less. In some cases they’re shutting the wells in to stop them producing–until new pipelines are finished providing access to new markets so they can sell gas for a higher price. The latest mainstream media source to note this trend is Bloomberg…
Today Antero Resources became the first major Marcellus/Utica driller to issue their third quarter 2015 update. The company reports a 39% increase in production over the same quarter last year, and a 1% increase from 2Q15. They must have some sharp financial types at Antero because the average price they received for their natural gas was $3.99 per thousand cubic feet (Mcf) in 3Q15, which is $1.22 higher than gas sold for in the NYMEX futures market. What that means is that they’re really good at hedging and using complicated financial instruments called derivatives in order to get a higher price for their gas than many others get. Good for them! However, not part of the update released today are Antero’s income statement and balance sheet–which will show the true financial condition of the company. They’re holding that back until the quarterly analyst phone call on Oct. 28. Here’s the operational report they filed today, with details about their Marcellus and Utica operations. We also spotted a new 10-year agreement to LNGÂ to Chubu Electric via the Freeport (TX) LNG terminal…
The price of natural gas isn’t going anywhere fast during winter 2015-2016. That’s the takeaway MDN gets from an analysis just released by the Natural Gas Supply Association (NGSA). The NGSA’s 15th annual Winter Outlook assessment (full copy below) says we have record production on the way, record amounts of gas in storage, and according to the National Weather Service, a winter that will average around 7 degrees warmer than last year. NGSA also says demand for natgas from electric generating plants and other users will tick up a bit. So on balance, NGSA says there will be “neutral pressure” on this winter’s natural gas prices compared to the winter of 2014-2015. In other words, the price isn’t going anywhere–likely to stay in the same neighborhood of last winter’s average Henry Hub price of $3.21 per thousand cubic feet (Mcf). MDN points out the price of gas varies widely depending on what part of the country you’re in. Although gas sold at the Henry Hub delivery point for an average of $3.21/Mcf last winter, gas selling at the Tennessee Gas Pipeline Zone 4 Marcellus delivery point was less than half that–around $1.50/Mcf last winter. NGSA is saying: What you saw last winter for prices is what you’re likely to see this winter…
It takes guts to walk boldly into the liberal lion’s den and tweak the nose of the beast. That’s what Marty Durbin, chief executive of America’s Natural Gas Alliance (ANGA), has done with an editorial appearing in yesterday’s Boston Globe newspaper. Durbin has the audacity to tell readers that their high energy bills and constrained natural gas supplies is “self-imposed.” He also tells them they can believe whatever they want, but they can’t defy the laws of supply and demand and there is no arguing the fact that New Englanders pay high energy prices because they lack necessary natural gas supplies. Just a few hundred miles away natgas prices in the Marcellus are a fraction of what gas sells for in New England. Marty pours it on! He also says a recent study shows without new natgas supplies for New England, by 2020 the average consumer will pay almost $1,000 more per year in energy costs than they do today. Read Marty’s audacious editorial for yourself below, full of cold, hard truth. Let’s hope New Englanders will see the light–which happens to be a blue natural gas flame…
CoBank, a national cooperative bank serving vital industries across rural America, has just published a study titled “U.S. Natural Gas Outlook through 2020: Demand Is the New Captain of the Ship” in which they predict the United States will become a net exporter of natural gas in 2017. While we don’t have a copy of the full report, we do have a summary below listing the key points in the report, along with a video…