US natgas drillers cut spending, reduce activity amid price crash

Comstock Resources

15/02/2024 20:26

By Scott DiSavino
       Feb 15 (Reuters) - U.S. natural gas producers are
slashing spending and reducing drilling activity following a
sharp decline in prices, companies said this week during
earnings presentations and analyst calls.
    For months of relatively low gas prices, many producers kept
output mostly steady on expectations that demand would rise in
2024 and 2025 when several liquefied natural gas (LNG) export
plants enter service.
    However, this week's collapse in gas prices to a 3-1/2-year
low convinced some drillers to reverse course. 
    Comstock Resources  CRK.N , a major U.S. gas producer, said
it would reduce the number of rigs in operation from seven to
five and suspend its dividend until gas prices rise
sufficiently.
    Antero Resources  AR.N , another big U.S. gas producer, said
it would cut its drilling and completion capital budget by 26%
after reducing the number of rigs in operation to two from
three. It also dropped one of its two completion crews.
    Antero expects a 3% decline in gas volumes this year versus
2023.
    " It's  good to see operators clearly lay out plans to slow
D&C (drilling and completion) capital at current gas prices,"
said Jake Roberts, an analyst for Perella Weinberg Partners'
TPH&Co, in a note. 
    In recent months, gas prices have dropped on near-record
output and low heating demand from a mild winter that left ample
amounts of gas in storage.  NGA/ 
    After falling about 24% over eight days, front-month gas
futures  NGc1  settled at $1.581 per million British thermal
units on Thursday, their lowest close since June 2020 during the
height of COVID-19 demand destruction.
    "The market is asking for not only production curtailments,
but also activity reductions," Jeremy Knop, CFO at EQT  EQT.N ,
the nation's biggest gas producer, told analysts in an earnings
call this week.
        Analysts said EQT was better positioned to avoid output
cuts near-term because it is well hedged in 2024, reducing its
exposure to the price collapse.
  
    EQT lowered its 2024 production guidance range by about 50
billion cubic feet equivalent (bcfe) from earlier guidance in
mid-January to 2,200-2,300 bcfe, which the company said includes
some flexibility to curtail volumes should prices remain weak.
    EQT's had total sales volumes of 2,016 bcfe in 2023.
    "If drillers continue to announce declining production
guidance and weather stabilizes ... natural gas may soon form a
short-term bottom with an overdue relief rally possible,"
analysts at energy consulting firm EBW Analytics Group said in a
note.
    Antero shares were up about 11% to a one-month high of
$23.47 after falling to a two-month low on Wednesday. Comstock
shares, which hit a two-year low on Wednesday, were up 2% to
$7.46.
    Shares of EQT were up about 4% to $34.24 on Thursday after
dropping to a nine-month low on Wednesday.

 (Reporting by Scott DiSavino; Editing by Liz Hampton and David
Gregorio)
 ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters
Messaging: scott.disavino.thomsonreuters.com@reuters.net))