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Lehman: 3% U.S. Production Decline in '03; Another 1% Decline Seen in '04

Lehman: 3% U.S. Production Decline in '03; Another 1% Decline Seen in '04

Lehman Brothers analysts estimated in a new report Monday that the U.S. natural gas supply last year fell 3%, and it will go down another 1% this year. The supply report surveyed 53 U.S. producers that account for about 73% of U.S. production and includes Canadian and liquefied natural gas (LNG) imports.

According to Lehman figures, U.S. gas production fell 2.8% last year, and may fall as much as 2% this year. Meanwhile, Canadian gas production declined even more -- 3.2% last year -- and will decline another 2-3% this year. Reduced Canadian production is "likely" the result of reduced Canadian imports, analyst Thomas Driscoll said.

LNG imports are showing more strength in the U.S. production mix, according to the analyst. "We believe LNG imports will double to 6% of U.S. supply by 2008," he said. "We estimate that 2003 estimated LNG imports were roughly 1.4 Bcf/d, more than double that of 2002." Trinidad accounted for about 75% of imports, and "we believe that it will continue to be a primary LNG supplier to the U.S. in the future."

Fourth quarter North American gas production decreased 0.8% sequentially and 2.9% year-over-year, according to estimates. In the United States, fourth quarter gas production decreased an estimated 1.5% sequentially and 3.1% year-over-year, while Canadian production increased 1% sequentially and declined 2.5% from the previous year.

Pioneer Natural Resources showed the biggest production gains among domestic producers, with an 80% increase year-over-year. Also showing strong gains were Apache Corp., up 56%; Nexen Corp., 44%; Chesapeake Energy Corp., 27%; EnCana Corp. and Westport, both up 26%; Forest Oil Corp., up 23%; and XTO Energy Corp., up 22%.

U.S. producers whose numbers fell the most year-over-year in Lehman's survey were El Paso Corp., which was down 40% following asset sales. Also showing losses last year compared with 2003 were Amerada Hess, which fell 33%, and Spinnaker Exploration Co., down 31%.

The biggest Canadian gainers last year were EOG Resources Corp., up 24%; Anadarko Corp., up 12%; and EnCana Corp., up 11%. Shell Canada's production fell 8% last year, while Talisman Energy Corp.'s production fell 6%.

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