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Gas Output Reported Up Sequentially in 4Q2009

March 8, 2010
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U.S. natural gas output for some of the largest domestic producers inched up sequentially in the final three months of 2009 from 3Q2009, according to a survey issued Friday by SunTrust Robinson Humphrey/the Gerdes Group (STRH).

STRH analyst John Gerdes and his team surveyed 49 U.S. natural gas producers for the quarterly survey. The 49 companies, according to STRH, account for an estimated two-thirds of domestic gas production after grossing up for royalty/working interests.

The surveyed companies' U.S. gas production quarter/quarter rose as the gas rig count jumped 7% to average 738 rigs, STRH noted.

"Our 4Q2009 production survey suggests a 0.3 Bcf/d (0.9%) sequential increase in U.S. natural gas output" from 3Q2009, which Gerdes said conforms to Energy Information Administration (EIA) data "suggesting a 0.9% sequential rise in production. The 49 surveyed firms constitute approximately two-thirds of domestic gas production after grossing up for royalty/working interests."

According to the STRH survey, the rise in output "implies a 0.5 Bcf/d sequential increase in overall U.S. output assuming the private independent capital spending and production is comparable to the surveyed companies."

"Exceptional" quarter/quarter growth was delivered by Chesapeake Energy Corp., EnCana Corp., Southwestern Energy Co., Petrohawk Energy Corp. and Questar Corp. "principally related to the Haynesville/Fayetteville shales," Gerdes said.

According to STRH's survey, Chesapeake led all U.S. gas producers, producing 2,440 MMcf/d in the final quarter, up from 2,266 MMcf/d in 3Q2009. XTO Energy Inc., whose output fell quarter/quarter, still wrangled the second-highest spot with 2,367 MMcf/d in 4Q2009 from 2,421 MMcf/d in the prior period.

BP plc ranked third in the survey, producing 2,313 MMcf/d in 4Q2009, compared with 2,278 MMcf/d in 3Q2009. Fourth in the survey was Anadarko Petroleum Corp., which saw its output fall to 2,076 MMcf/d in the final period of 2009 from 2,144 MMcf/d in 3Q2009. Rounding out the top five was Devon Energy Corp., which produced 1,893 MMcf/d versus 2,000 MMcf/d in the prior quarter.

"Looking forward," said Gerdes, "coverage company analysis, elevated level of 4Q2009 completions relative to drilling activity, year-to-date stabilization in the Haynesville Shale rig count and the underlying decline associated with a higher base of Haynesville Shale production suggest 1Q2010 production should approximate 4Q2009 output."

Energy analyst Patrick Rau said a "simple sensitivity analysis...corroborates our conviction that U.S. natural gas supply will likely fall very little, if at all, during 2010."

Rau used a "highly conservative, 'best-case' scenario and concluded that "actual supply balance is much more likely to rise in 2010, after factoring in probable increases in private company production and LNG [liquefied natural gas] imports."

In related news, the EIA reported Friday that 19 U.S.-based producers reported a four-fold increase in net income in 4Q2009 from 4Q2008. EIA said net income for the 19 companies totaled $13.7 billion on revenues of $261.6 billion.

"However, net income during the fourth quarter of 2009 represents a 37% decrease relative to the fourth quarter average for 2004-2008," the federal agency said.

EIA said the earnings grew in the final three months of 2009 by "the effects of lower natural gas prices, worldwide refinery throughput and domestic refining margins," which "were more than offset by the effects of higher crude prices and worldwide production of both crude oil and natural gas, leading to higher revenues and net income."

Upstream capital spending by the 19 companies declined in the quarter "after a year of lower-than-average (relative to the five-year average for the particular quarter) net income, while capital expenditures for refining/marketing decreased after a similar period of lower-than-average net income," the EIA said.

The natural gas-heavy U.S. producers included in EIA's survey included Anadarko, Apache Corp., BP (U.S. operations only), Chesapeake, Chevron Corp., ConocoPhillips, Devon, EnCana (U.S. operations only), EOG Resources Inc., EQT Corp., ExxonMobil Corp., Williams Cos. Inc. and XTO.

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