Natural Gas Boom Fizzles as a U.S. Glut Sinks Profits

Very interesting article about the downward spiral of drilling and exploration, From the New York Times.

Any opinions?

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.

https://www.nytimes.com/2019/12/11/business/energy-environment/natu...

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Replies to This Discussion

Permalink Reply by Ralph cramdon on December 22, 2019 at 2:15pm

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 .............. 

Permalink Reply by Mike h on December 21, 2019 at 3:46pm

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.

Permalink Reply by Jim Litwinowicz on December 30, 2019 at 8:59am

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.

All IMO.

Permalink Reply by Mike h on December 30, 2019 at 9:19am

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.

Permalink Reply by shakeshale on December 27, 2019 at 1:56pm
Antero Ha
Their cutting and selling like wild
Permalink Reply by Bill Simpson on December 23, 2019 at 10:36am

Another news article.

Seems all Doom and Gloom lately.

https://www.yahoo.com/finance/news/another-oil-major-bails-marcellu...

Permalink Reply by jc robb on December 30, 2019 at 9:05am

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.

Permalink Reply by frank speaker on December 30, 2019 at 11:15am
So two Fridays ago the Congress voted overwhelmingly to sanction the pipeline builders of Nordstream2 in a desperate attempt to halt construction. Trump, who is supposedly in the pocket of Russia, will sign the bill. The pipeline will be completed, but this doesn't matter to our knee-jerk government which pretends to be so moral and indignant to Russian interference. Our allies in Europe are outraged at our government for its truly mercenary interference, but yet this nonsense continues, and our citizens lap it all up. Meanwhile, 85% or more of my royalties are taken as 'expenses', and who pays for the billions to build export facilities, liquify the gas, ship it thousands of miles, deliquify it and ship it to Germany, when it can be sent as gas by pipeline a few hundred miles. Its total nonsense.

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