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, 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, 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.
“… 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.
After falling about 24% over eight days, front-month gas futures 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, 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)
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