Depressed prices and investor demand for cash flow point to expected slowdown
Austin, TX – Enverus, the leading energy SaaS and data analytics company, has released its latest FundamentalEdge report which points to an anticipated slowdown in natural gas production in the U.S. next year. The report also includes early 2020 guidance and a map highlighting where producers are most likely to find breakeven prices.
“Natural gas production has been increasing rapidly since 2006, with a notable growth acceleration taking place starting in 2017,” said Rob McBride, Senior Director of Strategy and Analytics at Enverus. “In the past three years, some areas grew by 32%, or 23 Bcf/d. However, we’ve also seen a steady drop in prices, which may be great for consumers, but challenging for producers. In 2019, natural gas demand in the U.S. averaged only 6% higher than normal. Add to that pipeline constraints and clear signals from operators they’re at a breaking point, and the writing on the wall becomes pretty clear—we’re expecting a significant slowdown in the growth of U.S. natural gas production next year,” McBride said.
Key Takeaways from the Report:
- Dry gas production has seen annual increases of 8-9 Bcf/d in 2018 and 2019. Enverus analysts expect that gain to drop to about 2 Bcf/d in 2020. This expectation is based on early guidance by E&P operators and assuming commodity prices of $55/Bbl for WTI and $2.50/MMBtu for Henry Hub. There is also downside risk on this forecast, which is most likely expected to get reduced once guidance is finalized in the next couple of months.
- Marcellus/Utica: 2019 was meant to bring long-awaited relief with the onset of several pipeline expansion projects. While this was true for a good part of the year, aggressive gains in production continued to surprise and caused renewed price weakness this past fall.
- Permian: Crude economics drive production growth in the Permian. Some relief was provided in the form of the new Gulf Coast Express pipeline during 2019, but it was quickly filled to capacity. Promising basin economics will continue to face takeaway capacity constraints.
- Haynesville: Just over 1 Bcf/d YoY growth here has surprised many, likely limited to Tier 1 acreage, which is the only area reliably in the money with a $2.13/MMBtu gas breakeven.
- Consumption and Exports: Domestic demand grows slowly over normal weather scenarios with upside risks in colder winters. Strong growth in LNG exports and moderate growth in Mexico exports provide the necessary outlet for increased U.S. production.
Storage Outlook: Enverus expects gas inventories to end the season 1.7-2.0 Tcf. This level will push prices down in 2020. Enverus expects gas prices to average $2.50/MMBtu starting in 2020.
Enverus is the leading data, software, and insights company focused on the energy industry. Through its SaaS platform, Enverus provides innovative technologies and predictive/prescriptive analytics, empowering customers to navigate the future. Enverus’ solutions deliver value across upstream, midstream and downstream sectors, enabling the industry to be more collaborative, efficient and competitive. With more than 1,000 employees across the globe, the Company’s solutions are sold to more than 6,000 customers across 50 countries. Enverus is a portfolio company of Genstar Capital and brings together the technology of Drillinginfo, PLS, 1Derrick, MineralSoft, Midland Map Co., MarketView, DataGenic Group, PRT, Oildex, Cortex, Red Dog Systems and RigData as one company. Creating the future of energy together. Learn more at enverus.com.
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