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Analyst Suggests Domestic Gas Output May Rise 2% in 2006

U.S. natural gas production in 3Q2006 increased 5.5% year over year -- an improvement largely reflective of hurricane-related recovery, according to energy analyst John Gerdes. However, Gerdes' survey also noted 2.2% production growth compared to 2Q2006, suggesting that overall, domestic gas production may rise about 2% this year, or 1 Bcf/d.

The Houston-based analyst of SunTrust Robinson Humphrey/the Gerdes Group said the production survey of 41 Lower 48 producers is in line with earlier positive forecasts that suggest that, discounting the rise attributed to storm recovery from 2006, domestic gas production still may be slightly higher. The producers surveyed by Gerdes, which include majors and independents, account for about two-thirds of the trend in U.S. gas production "after considering royalties/working interest." The survey was adjusted for acquisitions and divestitures to reflect actual organic growth.

"In 2006, given an average rig count of 1,375 and a 9% decline in rig productivity, our models forecast an increase in U.S. gas production of approximately 0.9 Bcf/d," Gerdes noted. "While historically our U.S. Natural Gas Production Survey has consistently understated U.S. gas production, reduced emphasis on Gulf of Mexico production and a reemphasis by the majors on North American gas development has aligned the survey with actual production trends."

Gerdes' gas production survey is more optimistic than the 3Q2006 survey issued by Raymond James Energy analysts earlier this month (see Daily GPI, Nov. 14). The Raymond James analysts, whose survey coverage is for about 55% of total U.S. gas production, reported domestic gas output rose 5% year-over-year. However, removing the storm impact, Raymond James analysts estimated U.S. gas production fell about 0.3% from 3Q2005.

When it removed the majors' domestic gas production for the period, the Raymond James' survey estimated the independents' gas output rose between 1-3%. However, Gerdes' survey included the impact of the majors' gas production year-over-year.

According to Gerdes, BP plc was the leading domestic gas producer in 3Q2006, producing 2,332 MMcf/d, down 1% from 2,364 MMcf/d in 3Q2005. ConocoPhillips was the second leading domestic gas producer for the quarter, with output at 2,320 MMcf/d, up 7% from 2,170 MMcf/d a year earlier. Rounding out the top five were Chevron Corp., down 3% to 1,846 MMcf/d from 1,897 MMcf/d; Anadarko Petroleum Corp., up 7% to 1,693 MMcf/d from 1,588 MMcf/d; and Devon Energy Corp., up 6% to 1,620 MMcf/d from 1,534 MMcf/d.

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