E&P Stock Perspectives Per Underlying Commodity Price Drivers
Forecasts Call For Active Hurricane Season With Impact, Apart
From Natural Gas Prices, Highest For SD, APC, APA, NBL & MRO
6 June 2013 ¦ 14 pages ir.citi.com
2013 Hurricane Season Outlook – The Atlantic Basin hurricane season officially
begins June 1st and extends through November with the peak typically from mid-
August through late October. And the first named storm of the season – Andrea – has
already formed in the Gulf of Mexico. Citi’s Meteorological team, along with most other
prominent prognosticators, is calling for another above-average hurricane season. But
the offshore Gulf of Mexico now accounts for just ~5% of total domestic natural gas
production, down from ~20% just eight years ago. Nonetheless, last year, Hurricane
Isaac resulted in the six E&P companies within our coverage group that had offshore
Gulf of Mexico operations (SD, APC, APA, NBL, NFX and MRO), shutting in ~2% of
their total production, on average, in the third quarter while at its peak Isaac resulted in
over 4% of total U.S. natural gas production (and ~2/3s of offshore Gulf volumes) being
shut in. But over the past decade, most storm-related shut-ins have been short-lived as
the result of precautionary measures. As a result, since 2005 only Hurricanes Katrina
and Rita have had a significant impact on natural gas prices. And more importantly,
tropical storms more often tend to be bearish for natural gas prices as a result of the
cooling effect from the remnants of a storm as it moves onshore. Nonetheless, any
significant disruption to production and, in turn, natural gas prices would have the
greatest impact, apart from the potential associated volume shut-ins for the
aforementioned companies (except for NFX which has since divested its offshore
assets), on the more natural gas-leveraged names in our coverage group this year
including COG, ECA, UPL, GDP, SWN and SD. |
