A Standard & Poor's Ratings Services (S&P) analyst on Friday said low natural gas prices have negatively affected gas-weighted operators but those able to pivot to liquids should be able to stumble through 2013, when prices are expected to slightly strengthen.
S&P's Ben Tsocanos, who directs corporate and government ratings, said one need look no further than the Baker Hughes gas-directed rig count from May 20, 2011 to May 18, 2012 to understand how some gassy exploration and production (E&P) operators are being left in the dust.
"It's out with the dry, in with the wet," Tsocanos said during a teleconference that included several S&P analysts who discussed the impact of low natural gas prices on several industry sectors. "The Haynesville Shale was the poster child in the gas boom years, and it's seen its rig count drop dramatically," he said.
A year ago gas rigs in the Louisiana/Texas play numbered close to 150. Today it's about one-third of that. In the Barnett Shale, the original shale gas play, the rig count last year was hovering above 80 or so. Today it's below 50.
Meanwhile, the liquids-rich Williston Basin, home to the Bakken Shale, and the Eagle Ford Shale have seen their rig counts jump in the past 12 months.
"We expect the shift to eventually mean a drop in natural gas production, but because of the associated gas in liquids wells, it will not be as big a drop as otherwise expected," said Tsocanos. "Eventually, production will respond and there will be some impact on [gas] prices and they will go up a bit. But it will take time and it will not be drastic."
S&P's gas price outlook for 2012 was cut in April to $2.00/Mcf from a January forecast of $3.00. Analysts now expect 2013 prices to average $2.75 and "thereafter" to be about $3.50, said Tsocanos.
Sustained low gas prices already have affected the ratings for some gas-oriented E&Ps. In April S&P cut the ratings outlook to "negative" on "companies primarily producing natural gas" and most affected by the drop in gas prices, said Tsocanos.
Those U.S. companies were Bill Barrett Corp., Comstock Resources Inc., Exco Resources Inc., Quicksilver Resources Inc., as well as privately held NFR Energy and RAAM Global Energy Co., which operates in the Gulf of Mexico.
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