E&P Stock Perspectives Per The March EIA-
914 Production and Demand Data
Haynesville Production Decline Underscores Sequential Drop
2 June 2013 ¦ 12 pages ir.citi.com
March EIA-914 Data Slight Positive For Gas-Leveraged E&P Stocks – The EIA-914
production data for March 2013 was reported on Friday with U.S. onshore natural gas
production for the month at ~68.9 Bcf/d, or a ~0.3 Bcf/d decline versus February and
versus our projection for roughly flat production sequentially. This followed a 0.9 Bcf/d
sequential increase in February. Also, U.S. onshore natural gas production in March
this year was ~1.7 Bcf/d higher than in March of 2012, despite nearly every company in
our E&P coverage group having reduced or minimized ‘dry’ gas-directed activity over
the prior year. Thus, the slight drop in domestic onshore natural gas production in
March could be viewed as positive for the more gas-leveraged E&P names including
COG, ECA, UPL, CHK, SWN, and RRC.
Haynesville Shale Underscored Sequential Decline... – The biggest sequential
production decline in March was in Louisiana where natural gas output fell ~0.3 Bcf/d
sequentially. This marked the ninth consecutive month of sequential declines with most
operators in the Haynesville, including Encana and Chesapeake, having reduced
activity to a minimum last year, while some operators reported shut-ins for
maintenance. However, Encana recently announced that it plans to ramp-up activity in
the Haynesville this year, although a production response won’t occur until later in the
year due to activity being pad drilling.
...While Marcellus Production Growth Slowed... – In the “Other States” category, which
includes Pennsylvania (Marcellus), Colorado (DJ Basin) and North Dakota (Bakken),
natural gas production declined ~0.1 Bcf/d in March after surging 0.5 Bcf/d sequentially in
February. This was only the second sequential decline in the Other States region over the
prior three years (output also declined 0.1 Bcf/d this past December) and could be largely
explained by a surge in production in February with new and previously uncompleted wells
coming on line due to infrastructure expansions. Then the subsequent initial decline in
output from these new wells in March more than offset production from fewer new wells
being tied in with no additional infrastructure build-outs. Nonetheless, Other States
production was up ~3.0 Bcf/d over March of last year.
...And ‘Associated’ Gas Volumes In TX & OK Continued To Rise – Natural gas
production in Texas rose 0.1 Bcf/d in March, after increasing 0.3 Bcf/d in February, due
to an increase in associated natural gas production in the Eagle Ford shale and
Permian Basin. This resulted from producers, including APA, CXO, CHK, DVN, EOG,
MRO and PXD, continuing to ratchet up oil/liquids drilling in these plays while adding
natural gas pipeline takeaway and gas processing capacity. In Oklahoma, natural gas
production also increased ~0.1 Bcf/d in March due to an uptick in associated
production from the Cana Woodford, Granite Wash and Mississippian plays where
APA, CHK, DVN, NFX and SD have leading positions. New Mexico gas production
increased by less than ~0.1 Bcf/d sequentially which was also driven by growth in
associated gas volumes from the Permian Basin.
Output In Rest of Lower-48 Declined Modestly – Elsewhere, production in Wyoming
was relatively flat, while offshore Gulf of Mexico output fell ~0.1 Bcf/d sequentially due
to natural field declines as well as maintenance and pipeline issues. As a result, total
U.S. Lower-48 natural gas production in March declined ~0.4 Bcf/d versus February to
~72.7 Bcf/ |
