Shale Gas Flashcards
What’s the outlook on NG prices?
Our cross-sector report, published on September 23, highlights the likelihood of low long-term US natural gas prices, with especially low prices in the Marcellus/Utica shale (the mid-Atlantic US). Our proprietary analysis points to relentless 2015 natural gas supply growth and low break-even gas prices for shale gas producers. In the Marcellus and Utica regions in particular, producers are able to achieve strong returns even at a local gas price below $3/mmBtu (relative to current Henry Hub natural gas prices of ~$4/mmBtu).
Reason #1 for this outlook
Relentless supply growth and tepid demand led us to reduce our 2015 forecasts. Thanks to significant growth in US natural gas production, natural gas inventories remain on pace to reach just over 3.5 Tcf by the end of October. Given continued very strong gas production, and delivery, growth for the balance of 2014 and in 2015 is expected to become the major headwind for prices, particularly under normal weather. We reduced our 2015 forecast by 12% (or $0.50/MMbtu) to $3.50/MMbtu to reflect this more bearish view.
Reason #2 for this outlook
Recent data points from Marcellus-Utica natural gas producers highlight low break-even production costs. At our recent Marcellus-Utica conference, gas producers emphasized their estimate that break-even costs were $2.00 or less; these companies are pursuing ongoing efforts to drive costs down further.
Reason #3 for this outlook
Shale gas production growth and booming US oil production point to strong net gas production growth in 2015
Reason #4 for this outlook
Key infrastructure additions reinforce NE supply growth
Beneficiaries of shale gas revolution
It is a very nice view at the gas ecosystem with companies that use gas as a raw material (Agrium, Celanese, Dow, etc). Gas-fired power generators (Calpine), Equipment manufacturers (Chart), Transportation companies (Energy Transfer Equity and others)
