Here's a counter view to R Jamaes report. Makes sense to me.
Morgan Stanley had this to say Tuesday:
"The over-watched and over analyzed 4Q production numbers are largely in. Adjusting for sales and purhases, our survey of 40 largest US producers shows prod. down 1.3% sequentially and down 1.4% Y-O-Y. (largely in line with expectations)
Of the 45 we track, 36 are independent producers, whose prod. is down more than average at 3.1% sequentially and 0.8% Y-O-Y. The importance of this is that "independent grouping" (publ & privates) comprise roughly 75% of total US nat gas prod. Extrapolating our 36 co. survey to the private/unreported players implies that US prod. actually fell by a more significant 2.2% sequentially and 1.8% y-o-y. This is the math driving consensus.
On the other hand, the integrateds and the Super Majors are experiencing far smaller declines, if at all. And with BP recently reporting a 1.2% sequential INCRERASE and 6.4% Y-O-Y INCREASE, the integrateds as a group actually posted increased sequential 4Q numbers. Given the deepwater and/or longer term nature of the projects, we expect these trends to persist thru 2002.
Moreover, we are not convinced that decline rates will accerlerate from here. Most industry seers forecast a price revival in 2H2002, generally assuming continued deterioration in decline rates. To us, this doesn't fit mathematically. The rig count peaked last July, with most incremental projects in 2000/2001 having been short life, high decline wells. As such, as the rig count has fallen and initial prod. exhausted (i.e. the Bossier field)industry wide declines should flatten, not accelerate. Isn't that why they are called curves? Andadarko always highlighted steep initial declines and then long tails. The point being, a further acceleration of the declines, as many predict, may ultimately prove disappointing."
Further on they add....."we still expect gas prices to deteriorate in Mar and Apr. A $1.50/mcf clearing price (i.e. coal switching, shut-ins?) is necessary, if the market is going to address the severe inventory overhang. Alternatively, a cap on NG prices is likely to persist for much of 2002, in our view."
Isn't it obvious that when flush prod. "has been flushed", declines should ease, not increase even more? |
