Despite an overall production gain for natural gas, companies participating in the Natural Gas Intelligence (NGI) North American natural gas marketer survey reported a 2 Bcf/d decline in sales volumes in 2011 compared with 2010, according to and NGI‘s 2011 Top North American Gas Marketers Ranking.
The die was set earlier in the year and the fourth quarter had almost no impact, with 4Q2011 just a fraction off results in 4Q2010, as reported in NGI’s 4Q2011 Top North American Gas Marketers Ranking. Market analysts blamed warm winter weather and low prices which left little room for arbitrage through multiple trades.
Twenty-six of the leading companies participating in NGI‘s survey had total sales transactions of 135.29 Bcf/d in 4Q2011, compared with 135.86 Bcf/d that they transacted in 4Q2010. But there was a 1% or 2 Bcf/d decline in the total sales transactions for the 12-month period, according to the survey. Three of the top five marketers for both the quarter and the year posted a decline in sales.
The lower trading numbers came at the same time 2011 saw an increase in domestic gas production of 4.3 Bcf/d, or 7.5%, over 2010, marking the largest year-over-year production jump in the last 25 years, according to Bentek Energy LLC. Production growth has stalled or declined in the last six months everywhere except in the Marcellus Shale as producers scale back dry gas activity due to low prices.
Surveyed sales volumes are always higher than production since the same package of gas may be bought and sold several times over on the way from the wellhead to the burnertip. The fact that sales volumes declined while production increased could be ascribed to lower prices dampening trading and spawning fewer multiple trades. It also could be that more production went into storage to be sold later.
Source: Quarterly financial reports with the Securities and Exchange Commission, or if necessary, statements signed by company officials and provided to NGI. Some previous-year data has been updated by the companies since it was originally reported.
Companies providing data directly to NGI include Bank of America Merrill Lynch, BP, Chevron, Citigroup, ConocoPhillips, EDF Trading NA, Gavilon, Gazprom, J. Aron & Co., JP Morgan, Louis Dreyfus, Macquarie Energy, Shell Energy and Tenaska. *Macquarie Energy data reflects Macquarie Energy LLC’s transactions in the United States and Macquarie Energy Canada’s transactions in Canada. **The gas volume figures for Apache, Chesapeake, Devon, EnCana and ExxonMobil represent the amount of North American gas produced in the quarter. Those companies may be marketing more third-party gas for sale. ***J. Aron & Co. is the commodity trading subsidiary of Goldman Sachs.
BP plc continued to hold the top spot in the survey, despite reporting decreases in both quarterly and annual physical sales of natural gas. The energy giant reported physical sales of 23.90 Bcf/d in 4Q2011, a 5% decline from 25.10 Bcf/d in 4Q2010, and it reported average sales of 23.00 Bcf/d for 2011, a 12% decline from 26.10 Bcf/d in 2010.
BP still faces legal hurdles related to the Macondo well blowout in the deepwater Gulf of Mexico two years ago, but it jumped a big one earlier this month when it clinched a hard-fought settlement with the Plaintiff’s Steering Committee, which acts on behalf of individuals and businesses in multi-district litigation proceedings pending in New Orleans (see NGI, March 12a).
Second-ranked ConocoPhillips reported a 10% increase in sales to 16.10 Bcf/d in 4Q2011, up from 14.70 Bcf/d in 4Q2010, and a 5% increase in NGI‘s Full-Year 2011 survey, reporting an average 15.45 Bcf/d, up from 14.65 Bcf/d in 2010. In January ConocoPhillips said it was shutting in about 100 MMcf/d in North America and didn’t anticipate spending heavily on new natural gas drilling this year (see NGI, Jan. 30a).
Shell Energy didn’t fare as well, reporting 13.80 Bcf/d in 4Q2011, a 9% decline from 15.10 Bcf/d in 4Q2010, and 13.20 Bcf/d for 2011, a 15% decline from 15.60 Bcf/d in 2010. Parent company Royal Dutch Shell plc recently said it is working on ways to leverage its abundant gas resources in North America and has plans progressing for liquefied natural gas (LNG) exports, gas-to-liquids and gas-to-chemicals facilities, as well as LNG for transport (see NGI, Feb. 6). U.S. gas prices continue to weigh on the company’s decisions, according to CEO Peter Voser.
The biggest percentage gainers were CitiGroup (No. 12) which had sales up 68% to 3.57 Bcf/d in 2011 over 2010, and JP Morgan (No. 6) with sales at 6.68 Bcf/d and ExxonMobil (No. 11) with sales at 4.33Bcf/d, both of which marked 37% gains.
Stubbornly low prices are behind a growing number of decisions in the industry and, according to Houston Energy Partners co-manager John Olson and other analysts, there is no quick fix in sight.
“The industry seems to be stuck in a ‘value trap,’ to use a Wall Street phrase, where a lot of producers have to sell their gas for whatever reason — maybe just to pay their note at the bank — while some others are selling their gas because they’re hedged at $4 or $5 or $6, and the misery index is accordingly high,” Olson told NGI.
Anemic natural gas prices may not bottom out until later this year, Olson said. “Here we are at about $2.25/Mcf, with the expectation of it going even lower. But to make money in this business on an all-in cost basis, you need about $7/Mcf on average…just to get that $7/Mcf you have to look out to 2025. We’re going through the capitulation stages right now. People are saying ‘we’re selling our gas, we’ll get whatever we can for it.'”
Chesapeake Energy Corp., which reported 2.96 Bcf/d in 4Q2011, a 16% increase from 2.56 Bcf/d in 4Q2010, bowed to low prices last month, upping its curtailments to about 1 Bcf/d of gross operated gas output, or about 1.5% of U.S. Lower 48 gas production, primarily in the Haynesville and Barnett shale plays (see NGI, Feb. 27). Chesapeake originally curtailed 0.5 Bcf/d in January (see NGI, Jan. 30b).
“That’s not terribly surprising under the circumstances,” Olson said. “It’s not a terribly pretty story near term, but the expectation is that gas will hit rock bottom by September and then start crawling back.”
What will pick up the slack in the slumping natural gas market? Don’t expect the transportation sector to soak up much of that surplus any time soon, Olson said.
While there has been plenty of recent news about automakers unveiling new natural gas vehicles (NGV) (see related story; NGI, March 12b), the Senate earlier this month failed to support an amendment to jump-start the adoption of NGVs and support infrastructure for large trucking fleets (see NGI, March 19).
NGVs becoming a significant sector of the nation’s transportation fleet remains “a long ways away still because of the lack of infrastructure,” Olson said. “Natural gas as a transportation fuel is a wonderful idea, no ifs, ands or buts about it, especially if you can improve the technology…what you need is big, heavy storage for compressed natural gas, and that works in buses and trucks very well, but for cars I’m not sure. Down the road it would make a lot of sense.”
Highlights of NGI’s 4Q2011 Top North American Gas Marketers Ranking include a 4% increase for Louis Dreyfus (7.20 Bcf/d, compared with 6.89 Bcf/d in 4Q2010), enough to bump the Stamford, CT-based to No. 6 in the survey from No. 12 in 3Q2011. The 4Q2011 survey also saw a 9% increase for Sequent (5.44 Bcf/d, compared with 4.98 Bcf/d in 4Q2010); a 52% increase for Citigroup (3.40 Bcf/d, compared with 2.24 Bcf/d in 4Q2010); a 5% increase for Devon Energy Corp. (2.66 Bcf/d, compared with 2.53 Bcf/d in 4Q2010); a 9% increase for Anadarko Petroleum Corp. (2.33 Bcf/d, compared with 2.14 Bcf/d in 4Q2010); and a 16% increase for Southwestern Energy Co. (1.75 Bcf/d, compared with 1.51 Bcf/d in 4Q2010).
Joining the NGI survey are Hess Corp., which reported 2.01 Bcf/d in 4Q2011 and 2.17 Bcf/d in 2011, and Omaha, NE-based Gavilon, which reported 1.41 Bcf/d in 4Q2011 and 1.29 Bcf/d for 2011.
Black Hills Corp. earlier this month closed the sale of energy marketing unit Enserco Energy Inc. to Houston-based Twin Eagle Resource Management LLC for $160-170 million (see NGI, Jan. 23). Enserco sold 1.40 Bcf/d in 4Q2011, an 11% decline from 1.58 Bcf/d in 4Q2010, Black Hills officials said during a conference call with investors last month. In 2011 Enserco sold 1.52 Bcf/d, a 4% decline from 1.59 Bcf/d in 2010.
Source: Quarterly financial reports with the Securities and Exchange Commission, or if necessary, statements signed by company officials and provided to NGI.
Companies providing data directly to NGI include Bank of America Merrill Lynch, BP, Citigroup, Chevron, ConocoPhillips, EDF Trading NA, Gavilon, Gazprom, J. Aron & Co., JP Morgan, Louis Dreyfus, Macquarie Energy, Shell Energy and Tenaska. *Macquarie Cook Energy data reflects Macquarie Cook Energy LLC’s transactions in the United States and Macquarie Cook Energy Canada’s transactions in Canada. **The gas volume figures for Apache, Chesapeake, Devon, EnCana and ExxonMobil represent the amount of North American gas produced in the quarter. Those companies may be marketing more third-party gas for sale.
In NGI‘s Full-Year 2011 Top North American Gas Marketers Ranking, highlights include an 11% increase for EDF Trading NA (7.22 Bcf/d, compared with 6.50 Bcf/d in 2010); a 37% increase for JP Morgan (6.68 Bcf/d, compared with 4.88 Bcf/d in 2010); a 37% increase for ExxonMobil Corp. (4.33 Bcf/d, compared with 3.16 Bcf/d in 2010); and a 68% increase for Citigroup (3.57 Bcf/d, compared with 2.12 Bcf/d in 2010).
The survey ranks marketers on sales transactions only. In a separate analysis of federal filings of gas sales, purchases and production last year, NGI found that BP was the only one of the top five U.S. producers of natural gas that also showed up among the top five gas marketers in 2010 (see NGI, July 18, 2011). BP led the marketers in combined sales and purchase volumes, followed by Shell, ConocoPhillips, Macquarie and JP Morgan, according to the in-depth NGI report, based on 2010 Form 552 filings with the Federal Energy Regulatory Commission.
The report also ranked U.S. natural gas producers. ExxonMobil led the top five, followed by Chesapeake Energy, BP, Anadarko Petroleum and Devon Energy, based on data from producer filings with the Securities and Exchange Commission.
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