Active Rigs In North Dakota Hold Steady At 67 -- December 19, 2018

Wells coming off confidential list today -- Wednesday, December 19, 2018:

• 34205, SI/NC, Hess, BB-Chapin-151-95-0506H-9, Blue Buttes, no production data,
• 34204, SI/NC, Hess, BB-Chapin-151-95-0506H-8, Blue Buttes, no production data,

Active rigs:

$46.73	12/19/2018	12/19/2017	12/19/2016	12/19/2015	12/19/2014
Active Rigs	67	54	41	64	182

RBN Energy: part 4, how responsive will Cove Point LNG exports be to economics?

The latest weather forecasts for the second half of December have taken the edge off the U.S. natural gas market and reduced the chance of a true doomsday storage scenario. But U.S. gas storage inventories nonetheless remain at historically low levels, and long-term weather forecasts are notoriously fickle. So this winter could still see a resurgence in volatility before the market finds a balance. And while Henry Hub prices went on a wild ride earlier this month before settling back in below $4/MMBtu, for most of December thus far, Eastern gas prices have traded at levels that make LNG exports from there uneconomic. In today’s blog, we continue our review of the winter U.S. gas market with a closer look at how Cove Point Liquefaction (CPL) might respond to high prices.

Earlier we analyzed how low gas storage inventories heading into winter set the market up for more gas price upside — and more gas price volatility — than has been the case in recent years, particularly if winter weather turns unusually cold. And indeed, as cold weather materialized early in the 2018-19 heating season, the NYMEX Henry Hub gas price took off, then bounced up and down within the $4-5/MMBtu range through November before mild December weather forecasts brought the January contract down to about $3.75/MMBtu.

We pointed out that the traditional governor for gas prices — switching between gas and coal in U.S. power generation — may not materialize in the same way it has in recent years, due to low coal inventories and some structural changes in the coal market.

We outlined the economics (and logistics) of turning off Sabine Pass LNG exports, coming to the conclusion that Henry prices would need to reach at least $5.50/MMBtu before we saw a material reduction in feedgas volumes.