Natural gas has been coming back recently and the top companies seem pretty confident about its future. See what they have to say about the current state of the market and their way of profiting from it.
Exxon Mobil was asked in its Q3 conference call if the decline in drilling rigs directed at their unconventional natural gas acreage was going to result in pretty rapid declines in production in 2012. Exxon’ reply was:
We will see how things go. I will tell you, in some areas, we’ve been actually able to keep the volumes flat, while reducing the rigs due to efficiencies we have gained, rates of drilled wells and that sort of thing. So we have been able to offset some of this decline in rigs with some improved operations and productivity.
Chesapeake is the number two producer in the country and has been responsible for a lot of the drilling that has been done at what have been uneconomic prices. You don’t have to go far into the Chesapeake third quarter call to find some pretty interesting comments about what the company thinks will happen with natural gas in 2013. CEO Aubrey McClendon observed:
Turning to natural gas markets, much to the amazement of most observers, the market has overcome an almost 900 bcf storage surplus from just seven months ago to a year-over-year storage surplus today of just about 120 bcf. We believe the small remaining storage overhang should soon go into a year-over-year deficit, a quite remarkable turn of events from this past spring.
There wasn’t much for specific production guidance from the Q3 Anadarko call but what was there was some guidance on what it would take to get these companies more interested in drilling natural gas wells again:
….as just a general comment, I think we need to see a sustained $5 gas before you see us commit a lot of capital back into the gas portion of our portfolio. And that’s really driven by getting the kind of rate of return, first off, that we want to see. And second, a portfolio that, frankly, from a competitive perspective, has a lot of other places that can get return without having to chase dry gas that has a lot of volatility around price discovery.
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