In the world of U.S. natural gas, one year is an eternity. Twelve months ago, the natural gas industry was exiting the storage withdrawal season with a staggering 800+ Bcf inventory surplus over the five-year average. Natural gas prices had dropped below the $2.00/MMBtu mark, and operators were voluntarily shutting in hundreds of producing wells to minimize the impact of sub-economics price realizations.
Fast forward one year. In a few weeks, the natural gas injection season will begin its count from a storage level that will be below the five-year average. (According to EIA, gas storage stood at 1,781 Bcf as of Friday, March 22, 61 Bcf above the five-year average. Another cold weather-driven ~100 Bcf drawdown expected this week – compares to an injection last year – should bring storage to a below-average level.)
Both spot and futures prices are trading close to their 18-month highs (the
Complete Story »
A Big Year Ahead For Bakken
(click to enlarge)
(Source: ND Pipeline Authority; Zeits Energy Analytics)
2013 is shaping up as a strong year for the Bakken, in contrast to 2012 when the play was hurting from skyrocketing drilling and operating costs, severe infrastructure bottlenecks, exploding basis differentials, and disappointing economics, forcing some operators to scale back their drilling plans. Looking forward, several positive factors are at work that should filter through to favorable year-on-year financial comparisons and contribute to a brighter outlook for the play in general:
- Crude oil takeaway issues have been largely resolved, with ample rail availability and major pipeline capacity additions expected in 2014-2016.
- Natural gas and NGLs should become increasingly bigger contributors to operators’ bottom lines as the build-out of processing and pipeline infrastructure is beginning to bear fruit and should catch up with production within next two years.
- Deeper Three Forks exploration is gaining
Complete Story »