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Gas Marketing Slightly Down in 4Q2008 -- But Big Names Got Bigger

Despite the economic recession and significant turnover among the players, the total volume of natural gas sold in North America slipped only about 1 Bcf/d, and two top companies were able to increase their sales, according to NGI's 4Q2008 Top North American Gas Marketers Ranking. Overall sales for full-year 2008 increased more than 2% over 2007.

Even as natural gas prices continued to fall and the credit crunch strained business, BP was able to increase North American physical sales to 32.50 Bcf/d, up 9% from 29.90 Bcf/d in 4Q2007. ConocoPhillips also saw an increase, reporting 14.10 Bcf/d in 4Q2008, up 3% from 13.70 Bcf/d in 4Q2007. But decreases reported by several other companies in the survey kept the total down just slightly for the quarter at 123.62 Bcf/d, compared with 124.72 Bcf/d in 4Q2007.

The top 22 reporting marketers for full-year 2008 -- excluding BP -- transacted 93.18 Bcf/d, up more than 2% over the 90.91 Bcf/d in 2007. BP's average sales for all of 2008 -- 30.80 Bcf/d -- could not be compared to 2007 because the company wasn't reporting at that time, but the companies with the second and third highest numbers for 2008 each reported increases for the year. ConocoPhillips, which scored 14.30 Bcf/d in 2008, up 5% from 13.60 Bcf/d the year before, has said it will slow the pace of its North American drilling, especially in some of the more price-sensitive resource plays, due to lower commodity prices and lower energy demand. Shell Energy NA reported sales of 14.18 Bcf/d last year, up 7% from 13.30 Bcf/d in 2007.

Recent reshuffling of the North American energy trading sector has removed some once-prominent names from the rankings. During the quarter J.P. Morgan announced that it would acquire UBS Commodities Canada Ltd., the Canadian energy operations of UBS AG, and Barclays Bank plc picked up UBS' natural gas trading portfolio in the United States (see NGI, Jan. 5). UBS Energy last participated in NGI's Top North American Gas Marketers ranking in 3Q2008, when it marketed 3 Bcf/d. J.P. Morgan does not currently participate in the rankings.

While Constellation Energy did not participate in the 4Q2008 survey, the pending combination of its downstream natural gas unit with the operations of Australian investment bank Macquarie Group's Macquarie Cook Energy could create a gas marketer with about 17 Bcf/d of volume, which would place it near the top of the rankings, according to company and NGI figures (see NGI, Feb. 9).

Front-month natural gas futures prices have fallen precipitously since last summer. After futures peaked at $13.694/MMBtu on July 2, 2008, prompt-month natural gas values have plummeted approximately 73% to Wednesday's close of $3.684. Yet even taking into account the recent volatility and the growth at the top and the declines at the bottom of the rankings, the industry remains competitive, according to Maryland-based energy consultant Ben Schlesinger.

"There were some losses that the industry sustained in terms of participation of some companies, more increased concentration of other companies, but the net sum of it was a very slight increase in market concentration, and it still leaves the industry very highly competitive," Schlesinger told NGI. "Natural gas is consistently one of the most competitive industries on a national basis. Whatever parties dropped out, it still left the industry a highly competitive one.

"Gas is a real textbook case of the successful deregulation of an industry. We had some awful hiccups in the early part of this decade but, if anything, it left this industry in a much stronger position to withstand the current recession than many other industries are in, or than it otherwise would have been. I guess that's one of the successful offshoots of having gone through the pain six to eight years ago."

Looking at some of the highlights of the quarter, Enserco's volume posted 37% growth from 1.64 Bcf/d during 4Q2007 to 2.24 Bcf/d for 4Q2008. The next two largest increases were XTO with a 30% jump from 1.67 Bcf/d to 2.17 Bcf/d and Devon, where marketing volumes climbed 10% from 2.45 Bcf/d to 2.69 Bcf/d.

Chesapeake Energy Corp. reported 2.13 Bcf/d in 4Q2008, up 4% from 2.04 Bcf/d in 4Q2007, and saw an 18% jump for the year -- 2.12 Bcf/d in 2008, compared with 1.79 Bcf/d in 2007. Achieving the same increase may be hard for Chesapeake to match in the near future: the company has sold off some of its properties and recently curtailed 7%, or around 240 MMcfe/d, of its gross gas and oil production because of "extraordinarily" low wellhead prices in the Midcontinent region (see NGI, March 9). The curtailment was set to last at least through March, and another 10% of the producer's drilling activity through the rest of this year may be slashed "if natural gas and oil prices remain low during the next few months."

Apache Corp. averaged 1.03 Bcf/d in 2008, down from 1.16 Bcf/d in 2007, and saw its 4Q2008 production dip below 1 Bcf/d. Hurricanes Ike and Gustav, which struck the Gulf Coast last September, caused damage to third-party pipelines, taking nearly a quarter of Apache's gross oil and natural gas production off-line in the Gulf of Mexico (GOM) for all of 4Q2008 (see NGI, Feb. 23). The company hopes to have all GOM volumes restored in the second quarter.

Highlights of NGI's Top North American Gas Marketers Ranking for the full year included XTO's 31% growth from 1.46 Bcf/d during 2007 to 1.91 Bcf/d for 2008 and Louis Dreyfus' 20% jump from 6.47 Bcf/d in 2007 to 7.77 Bcf/d in 2008. Nexen reported a 16% jump from 5.80 Bcf/d in 2007 to 6.70 Bcf/d in 2008.

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