Natural gas prices declined severely over the last two weeks, and on Tuesday afternoon the March contract settled at $1.576/MMBtu. In nominal dollars, this was the lowest front month price since the summer of 2020, but in real terms it was the lowest price of the 21st century. Since reaching that threshold, there are preliminary signs that producer discipline may tighten. Most notably, the most recent investor presentation from Chesapeake Energy promised that capital expenditures would decrease by 20% this year. The company will be downsizing one frac crew in the Haynesville shale and one in Marcellus. Chesapeake now estimates that its own 2024 production will decline by more than 0.7 Bcf/d, or more than 20% year-on-year.
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Just in Time - Chesapeake Counters Gas-Price Nadir With Output Slash, Innovative Inventory Build
Faced with sustained sub-$2/MMBtu natural gas prices and dim prospects for significant gas-demand growth until sometime next year, a number of major gas-focused E&Ps have been tapping the brakes on production and trimming their planned 2024 capex. But one company — Chesapeake Energy, slated to become the U.S.’s largest gas producer thanks to a recently announced acquisition — has taken a more dramatic step, implementing a novel strategy that will slash production by 25% but leave the E&P ready to quickly ramp up its output as soon as demand and prices warrant. In today’s RBN blog, we’ll review the 2024 guidance of the major U.S. gas producers and delve into the analysis of Chesapeake’s unusual approach.
- Blog
Fear and Loathing - With Brutally Bearish Fundamentals, How Low Could Natural Gas Prices Go?
It’s been a devastating few weeks for the natural gas market. Sure, Shale Era abundance was supposed to keep gas prices from skyrocketing — and it generally has. But seriously? Henry Hub gas sinking below $2/MMBtu — and staying there, in the depths of the winter heating season? Prices have stabilized a little in recent days as a few E&Ps announced cutbacks in capex and gas-focused drilling, but gas-storage levels are abnormally high, coal-plant retirements have trimmed opportunities for coal-to-gas switching, and any significant gains in LNG exports aren’t going to happen until this time next year. With all that, you’ve gotta ask — as we do in today’s RBN blog — how low could natural gas prices go?
- Blog
Fear and Loathing, Encore Edition - With Brutally Bearish Fundamentals, How Low Could Natural Gas Prices Go?
It’s been a devastating few weeks for the natural gas market. Sure, Shale Era abundance was supposed to keep gas prices from skyrocketing — and it generally has. But seriously? Henry Hub gas sinking below $2/MMBtu — and staying there, in the depths of the winter heating season? Prices have stabilized a little as a few E&Ps announced cutbacks in capex and gas-focused drilling, but gas-storage levels are abnormally high, coal-plant retirements have trimmed opportunities for coal-to-gas switching, and any significant gains in LNG exports aren’t going to happen until this time next year. With all that, you’ve gotta ask — as we do in today’s RBN blog — how low could natural gas prices go?
