Very interesting article about the downward spiral of drilling and exploration, From the New York Times.
A decade ago, natural gas was heralded as the fuel of the future. In shale fields across the country, hydraulic fracturing uncorked a lucrative new source of supply. Energy giants like Exxon Mobil and Chevron snapped up smaller companies to get in on the action, and investors poured billions of dollars into export terminals to ship gas to China and Europe.
The boom has given way to a bust. A glut of cheap natural gas is wreaking havoc on the energy industry, and companies are shutting down drilling rigs, filing for bankruptcy protection and slashing the value of shale fields they had acquired in recent years.
Chevron, the country’s second-largest oil and gas giant after Exxon, said on Tuesday that it would write down $10 billion to $11 billion in assets, mostly shale gas holdings in Appalachia and a planned liquefied natural gas export facility in Canada. The move was an energy company’s clearest acknowledgment yet that the industry has been far too optimistic about the prospects for natural gas.
While cheap natural gas continues to take market share from coalin the electricity sector, supply of the fuel has far outstripped demand. As a result, once-booming gas fields in Arkansas, Louisiana and Texas have become quiet backwaters. The number of gas rigs deployed nationwide has dropped to 132, from 184 last year.
Producers still have lease commitments and pipe capacity deals to fulfill .... The drilling continues for the likes of Antero and Cabot .........
Drilling will eventually slow down , the question is when ..............
Brent, you fail to mention that in various Western U.S. plays, the natural gas is a byproduct of oil production. This means the drilling and gas production is not particularly sensitive to pricing pressures.
Spot on. the Permian is producing huge amounts of nat gas and will continue to do so as oil is the main driver of drilling there. That will keep nat gas prices low for a long time....10 yrs or more. Don't expect a boom in any dry gas areas soon. Utica may pick up as it is more a wet gas play and those products will be in more demand as the econ grows.
One thing to point out, the drill rig count is not necessarily an accurate predictor of future production since they drill much longer laterals, use more sand, and are getting increased fracking results. It would be better to use some basis like 'well bore length' and combine that with expected production per ft.
One thing that will bring up local Utica/Marcellus gas prices is local cracker plant(s). More local natural gas electrical production will help some as well. Henry Hub prices are a guideline but at the end of the day, local pricing will recognize local demand vs transportation costs to move the gas somewhere else.
Another news article.
Seems all Doom and Gloom lately.
free enterprise doing what it does. good. i haul freight for a living. seen a few of them come and go. thats the way life really is. organic.