US natgas prices soar 10% from 3-1/2-year low as Chesapeake cuts output (updated)

Southwestern Energy Co

21/02/2024 15:50

(Adds latest prices, quote and background)
    By Scott DiSavino
       Feb 21 (Reuters) - U.S. natural gas futures soared by
about 10% on Wednesday after Chesapeake Energy  CHK.O  - soon to
be the biggest U.S. gas producer after its merger with
Southwestern Energy  SWN.N  - cut the amount of gas it plans to
produce in 2024 by about 30% due to the recent plunge in prices
to a 3-1/2-year low.
    Chesapeake was just the latest U.S. gas producer to slash
spending and reduce rigs after prices dropped about 31% so far
in 2024 after falling 44% in 2023.
    Last week, U.S. energy firms Antero Resources  AR.N ,
Comstock Resources  CRK.N  and EQT  EQT.N , currently the
nation's biggest gas producer, said they also planned to reduce
drilling this year.
    Chesapeake lowered it prior capital expenditure guidance by
about 20% through rig count reductions and deferring well
completions, which should cut gas production to around 2.7
billion cubic feet per day (bcfd) in 2024, down from around 3.5
bcfd in 2023.
    One billion cubic feet is enough gas to supply about five
million U.S. homes for a day.
    "We’re fans of the move as (Chesapeake) slashes production
well below consensus expectations while preserving volumes for a
healthier demand market in 2025+," said Matt Portillo, head of
research for Perella Weinberg Partners' TPH&Co.
        Portillo was referring to a widely held belief in the
market that U.S. gas demand will surge higher in 2025 and beyond
as several liquefied natural gas (LNG) export plants that are
currently under construction enter service.
  
        U.S. LNG export capacity is expected to almost double
over the next four years from about 13.8 bcfd now to around 24.4
bcfd in 2028. Analysts said that projected LNG demand growth was
the primary reason many producers have kept gas output near
record levels despite the price drop - until now.
  
        Gas prices fell so far this year because a mild winter
kept heating demand low, leaving stockpiles at well above normal
levels, while output remained near record levels despite an
Arctic freeze in January that briefly cut output and caused gas
demand to soar to a record high.
    Analysts noted that gas output could still increase in 2024
even if more producers cut back on gas drilling because crude
prices  CLc1  were high enough to encourage oil producers to
drill in shale basins like the Permian in Texas and New Mexico
and the Bakken in North Dakota, where oil wells produce a lot of
associated gas.
    Analysts forecast U.S. gas stockpiles at around 22%
above-normal levels for this time of year.  EIA/GAS   NGAS/POLL 
    Front-month gas futures  NGc1  rose 15.9 cents, or 10.1%, to
$1.735 per million British thermal units at 10:10 a.m. EST (1510
GMT).
        That pushed the front-month out of technically oversold
territory for the first time in 11 days and would be the biggest
one-day percentage gain since April 2023 when prices jumped
11.2%.
        On Tuesday, the contract closed at its lowest since June
2020, which was the height of COVID-19 demand destruction.
  

 (Reporting by Scott DiSavino; Editing by Andrea Ricci and
Franklin Paul)
 ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters
Messaging: scott.disavino.thomsonreuters.com@reuters.net))
 
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