Active Rigs Down To 113 -- March 5, 2015

Active rigs:

	3/5/2015	03/05/2014	03/05/2013	03/05/2012	03/05/2011
Active Rigs	113	192	186	206	172

RBN Energy: Northeast NGL.

Northeast natural gas prices have been flipped upside down over the last couple of years and have shown unprecedented weakness relative to Henry Hub due to capacity constraints preventing booming production reaching new demand markets.  New infrastructure projects should relieve this congestion in the next two years but as we explain today, the current market view – expressed in the forward curve - does not appear to reflect that reality.

This is Part 5 in our natural gas forward curve blog series. In Part 1 we defined the forward curves, reviewed their mechanics and examined the fundamental factors underlying the U.S. natural gas forwards markets:  supply, demand, storage, transportation/infrastructure and weather. In Part 2 and Part 3 we looked at how the forward curves in two Northeast gas markets – Transco Zone 6 in New York and Dominion South in Appalachia -- have been completely reshaped by the shale revolution and resulting production growth in the Northeast. Northeast gas prices have gone from being the highest in the country to some of the lowest as the region has transformed in the last few years from being a demand-heavy market to a major producing region on the verge of becoming a net gas supplier to the U.S. In Part 4, we previewed the fundamental drivers influencing the Northeast forward curves for the next several years as new infrastructure comes online to connect production to markets outside the region.

Today, we look more closely at the timing of these fundamental changes and how they correlate to current Northeast forward curves. Our analysis of a recent Dominion South Point (Dom S) forward curve suggests a possible disconnect between the current market view and the expected timing of infrastructure changes.