US natgas output down 7% as producers cut back amid price collapse

Southwestern Energy Co

06/03/2024 19:14

By Scott DiSavino
       March 6 (Reuters) - U.S. natural gas output fell about
7% over the past month as producers scaled back production
following a collapse in prices to a 3-1/2-year low.
    Gas prices are down about 23% so far this year, after
plunging 44% in 2023, as record production and weak demand from
a mild winter left storage facilities at well above seasonally
normal levels. Major producers, including Chesapeake Energy
 CHK.O  and EQT  EQT.N  have responded by cutting production.
    Gas output in the U.S. Lower 48 states fell to an average of
100.1 billion cubic feet per day (bcfd) so far in March, down
from 104.1 bcfd in February, according to financial company
LSEG. That compares with a monthly record of 105.5 bcfd in
December 2023.
    On a daily basis, output was on track to drop around 6.6
bcfd over the past month to a preliminary six-week low of 98.2
bcfd on Wednesday. That would be the lowest daily production
since early February 2023, excluding a massive 17.3-bcfd drop in
mid-January due to freezing wells.
    One billion cubic feet is enough gas to supply about 5
million U.S. homes for a day.
    Last week, gas futures  NGc1  fell to an intraday low of
$1.511 per million British thermal units, their weakest since
June 2020. On an inflation-adjusted basis, gas prices have
already collapsed to their lowest in over 30 years.  NGA/ 
    
    PRODUCERS REDUCE OUTPUT
    The output reductions over the past month underscore that
some energy firms, like Chesapeake, Antero Resources  AR.N  and
Coterra Energy  CTRA.N , were following through on plans to cut
production this year, analysts said.
    "Some producers have suggested they would hold production
flat, while others have noted that they will cut drilling and
completion activity, which will affect output six to nine months
down the road," analysts at Bank of America said in a note.
    EQT, currently the biggest U.S. gas producer, said on Monday
it would curtail nearly 1 bcfd of production through at least
March, cutting an estimated 30-40 bcf of net production during
the first quarter.
    EQT said it would "reassess market conditions thereafter."
    "EQT's announcement of a 1-bcfd cut of gross natural gas
production explains the speed of recent supply losses," analysts
at energy consulting firm EBW Analytics Group said in a note.
    EBW projected EQT would likely extend reductions beyond
March because the storage surpluses and weak physical pricing
would likely persist in April.
    Gas in storage is currently about 31% above normal levels
for this time of year, analysts have estimated. They project
that surplus will increase in coming weeks with the weather
expected to remain warmer than usual through mid-March.
 EIA/GAS   NGAS/POLL 
    In its 2024 outlook, Chesapeake, soon to become the biggest
U.S. gas producer after its merger with Southwestern Energy
 SWN.N , guided spending lower by about 20% to around $1.25
billion to $1.35 billion through rig count reductions and
deferring well completions.
    Deferring completions should allow Chesapeake to reduce
output in the short term, while maintaining its ability to
quickly increase output when needed, analysts said. 
    The industry expects gas demand to increase in late 2024 and
beyond as LNG plants under construction in the U.S. and Mexico
enter service.
    LNG capacity in the U.S., already the world's biggest
exporter of the supercooled fuel, is on track to almost double
over the next four years from around 13.8 bcfd now to 24.5 bcfd
in 2028.

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