The State of Oil and Gas: October 15, 2020

Natural gas prices are $2.79/MMBtu after hitting a low below $2.00 about three weeks ago, and rig counts are at 269, climbing slowly as drillers realize that their production numbers are falling off too much.

Chevron has at least one bid for its Marcellus/Utica holdings. EQT has offered $750 million. Chevron has about 800,000 acres and some pipeline rights up for sale, so that’s bargain basement territory, right around $1000 per acre. It’s hard to imagine that other bids are for significantly more, though.

Natural gas prices will be lower for many West Virginia consumers this winter.

Demand for natural gas is down, but drilling is down even more. New wells won’t supply even the reduced demand. Drillers don’t have the money to drill enough new wells. Instead, they are completing drilled but uncompleted wells (DUCs), wells that they drilled in the past but didn’t frack.

Gas prices nosedived, but that’s pretty typical this time of year.

LNG exports seem to be picking back up, judged by the line of tankers in the Gulf.

Libya is starting up oil production, again, but not totally.

Slapping Governor Jim Justice in the face, the West Virginia Economic Development Authority approved a direct loan (not just a loan guarantee) to the Brooke County power plant.

The Mountaineer NGL Storage project has requested that the State of Ohio cancel it’s permits. This is bad news, but not necessarily an end. This project is very dependent on the PTT Chemical cracker plant getting built, and they keep kicking that can down the road. If the cracker gets final approval, the storage project will probably get final approval.

The EIA just now (October 2020!) published numbers for 2019 for natural gas production, use, and export. All three set record highs.

One prediction has natural gas prices hitting $5/MMBtu next year. I have a hard time believing that, as it’s only too easy to bring more rigs online and increase production to offset any rise in demand. That’s what horizontal fracking has done to the oil and natural gas market.

Here’s a good analysis of current natural gas supply and demand over at Seeking Alpha. Short take: demand is slowing, but supply has slowed more.

Since we’ve posted one prediction, here’s another. Yahoo Finance is saying 2021 will see $3.13/MMBtu average for the year, due to reduced production. I’d say that’s a more realistic price prediction.

Southwestern Energy owns a lot of leases in West Virginia. Their bank has reaffirmed their line of credit of $1.8 billion. They must be doing OK, even in these lean times.

Saudi Arabia plans to increase oil production from 12 million barrels per day to 13 million barrels per day. Expect to see prices at the pump go down.

The Brooke County power plant that the Governor was fighting with Brooke County over is now dead. The CEO said that investors were scared off by the fight. Well, those weren’t his words, but read between the lines for yourself.

A third prediction puts natural gas prices ending 2021 at $4.00/MMBtu. Huh. Those folks follow the market forces a lot closer than we do, so maybe…..?