Eighty-six percent of energy industry and investment community executives polled recently by Tudor, Pickering, Holt & Co. (TPH) believe 2012 Henry Hub natural gas prices will average less than $2.50/Mcf, and 23% think prices will average less than $2/Mcf.
And this summer more than half of those polled said gas pries will average less than $2/Mcf, with 46% saying $1.50-2.00 and 12% saying less than $1.50/Mcf.
That's pretty dour, but among the 768 respondents (two-thirds industry executives and one-third institutional investors), the view brightens a little bit for next year. Sixty-five percent believe 2013 Henry Hub prices will average less than $3/Mcf, but 28% think prices will be $3.00-3.50/Mcf, and 8% think they will average more than $3.50/Mcf.
But still it can't be denied; "everyone hates gas," as the Houston-based energy investment bank said in the summary of its spring 2012 energy survey.
As the industry rolls into the summer gas storage injection season with inventories brimming, there is broad consensus that underground caverns will reach their limit of about 4,100 Bcf before the end of the traditional injection season; 78% of TPH survey respondents think so. However, 22% do not, which left the bankers "surprised."
In its Short-Term Energy Outlook for April the Energy Information Administration said it expects gas prices will average $2.51/MMBtu this year, down from its March projection of an average price of $3.17/MMBtu for the year (see Daily GPI, March 12). EIA said natural gas spot prices averaged $2.18/MMBtu at the Henry Hub in March, the lowest average month price since April 1999 (see Daily GPI, April 11).
With gas clearly out of favor this spring and likely for a while to come, the energy industry and investors look to oil in a big way. According to the TPH survey, "an overwhelming majority" of respondents believe crude oil will average $90-110/bbl this year and next.
"With gas at or below $2.50/Mcf and crude at $105/bbl [as of the date of the survey], rig count should remain flat for the rest of 2012 as up to [a] 200-rig decline in gas is offset by an increase of up to 200 oil-directed rigs," the survey indicated.
Producers and investors clearly want to see higher gas prices before any kind of return to dry gas drilling is embraced. According to the survey consensus, the gas-directed rig count won't increase until gas gets above $3.50/Mcf, and 41% of respondents believe it will take prices above $4/Mcf to move the gas-directed rig count upward. Decidedly bearish on prices, the survey respondents were bullish on production. Only 10% said gas production would decline this year. Thirty-one percent said supply would remain flat, but 51% said it would grow by 1 Bcf/d, and 8% said it would grow by 3 Bcf/d.
"This is why everyone hates gas!" the TPH team said.
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