WTI: $78.46.
Wednesday, March 6, 2024: 92 for the month; 151 for the quarter, 151 for the year
39572, conf, Grayson Mill, Barracuda 150-100-2-11-8H,
None.
RBN Energy: 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.
Natural gas prices have declined severely over the past two or three weeks, and a few days ago (February 20) the March contract settled at $1.576/MMBtu. In nominal dollars, that was the lowest front-month price since the summer of 2020, but in real, inflation-adjusted terms it was the lowest price of the 21st century. The primary culprits are record-high production, which reached 106 Bcf/d in December 2023, combined with one of the mildest winters since the 1950s in many major U.S. heating markets. As a result, gas-storage levels are now more than 25% higher than the five-year average.
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