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NatGas Marketers Ended Two-Year Downward Slope in 1Q2014

Sales by more than two dozen leading natural gas marketers during the first three months of 2014 increased 0.61 Bcf/d (about 0.5%) compared with 1Q2013, a small rebound for a market that had been on a downward slope for nearly two years, according to NGI's 1Q2014 Top North American Gas Marketers Ranking.

Twenty-five leading gas marketers reported combined sales transactions of 129.50 Bcf/d for 1Q2014, with six of the survey's top 10 marketers and 13 companies overall, including one major newcomer to the survey, reporting higher numbers than in 1Q2013. A year ago those same companies reported 128.89 Bcf/d in sales.

NGI's survey of North American marketers hadn't reported an overall increase in sales year/year since 2Q2012, when 27 participating companies sold a total of 135.86 Bcf/d.

BP plc tightened its hold on the survey's top spot, reporting 24.90 Bcf/d in 1Q2014, a 2% increase from 24.50 Bcf/d in 1Q2013. The London-based major said during the quarter that it plans to separate its U.S. onshore Lower 48 business (see Daily GPI, March 4). The move is expected to help unlock the value associated with the company's resource position in the U.S. Lower 48 onshore, which BP currently oversees through its Houston-based North America Gas group. In the offshore BP continues to deal with repercussions from its 2010 Macondo well blowout in the deepwater Gulf of Mexico (GOM) (see Daily GPI, June 5; May 29; May 21).

Also posting a 2% increase in NGI's 1Q2014 survey was Shell Energy NA, which reported 12.90 Bcf/d, compared with 12.70 Bcf/d in 1Q2013. Shell is reconfiguring its North American portfolio and selling a lot of U.S. onshore assets (see Daily GPI, May 20; Jan. 30).

For a fourth consecutive quarter, the largest decline came at ConocoPhillips, which reported 11.40 Bcf/d, down 1.59 Bcf/d (12%) from 12.99 Bcf/d in 1Q2013. A similar decline in 3Q2013 dropped ConocoPhillips to third place in the survey for the first time in nearly three years (see Daily GPI, Dec. 12, 2013; March 21, 2011). The double-digit declines, which ConocoPhillips first reported in NGI's 1Q2013 survey, are primarily due to the implementation of business model restructuring in North America following the spin-off of downstream operations in 2012 (see Daily GPI, April 17, 2012) and the company's view of market conditions. The Eagle Ford Shale is now ConocoPhillips' biggest contributor, leading the company to an average 507,000 boe/d production in 1Q2014, 7% higher than the year-ago period (see Shale Daily, May 2). The operator, now the biggest independent in the United States, also has extensive oil and gas development ongoing in the deepwater GOM, as well as in Alaska and Canada.

It was mostly good news in the Top 10 in the 1Q2014 survey, with increases compared with the year-ago period reported by Macquarie Energy (9.57 Bcf/d, up 1% from 9.52 Bcf/d), Tenaska (8.20 Bcf/d, up 11% compared with 7.40 Bcf/d), Sequent (7.30 Bcf/d, up 16% compared with 6.30 Bcf/d) and J. Aron & Co. (6.25 Bcf/d, up 39% from 4.51 Bcf/d).

Also reporting a significant increase compared with 1Q2013 was Direct Energy, which acquired Hess Corp.'s New Jersey-based energy marketing business last year for $731 million in cash and $300 million in net working capital (see Daily GPI, July 31, 2013). In its first appearance in the NGI survey, Direct Energy reported 3.37 Bcf/d in 1Q2014, more than doubling the 1.41 Bcf/d it reported in 1Q2013. With plans to sell its energy marketing unit looming, Hess slipped out of NGI's ranking in 1Q2013 (see Daily GPI, June 10, 2013). Hess had been reporting significantly lower numbers than the latest from Direct Energy.

"I think the market has improved; clearly things have stepped up to the mid-$4.00 range in pricing from where we were a year ago, which I think is healthy," said Maryland-based energy consultant Ben Schlesinger. "Prices of $3.00 and under are just not enough to sustain a business, and people are still getting a huge bargain when they buy natural gas."

But the gas market will get a bigger boost when LNG exports and industrial demand begin soaking up more natural gas, Schlesinger told NGI.

"We're still kind of 'Waiting for Godot,' waiting for gas demand to move forward. Obviously, we're closer to that point, and after the polar vortex on the one hand, versus some pipeline completions on the other hand, we've seen how the industry is going to prepare itself to respond to increased demand, and the answer is it should do a pretty good job."

The Energy Information Administration (EIA) expects total natural gas consumption will average 72.5 Bcf/d this year, an increase of 1.7 Bcf/d compared with 2013, with a 0.2 Bcf/d falloff expected in 2015 as a return to near-normal winter weather contributes to lower residential and commercial consumption (see Daily GPI, June 11). EIA also expects natural gas spot prices will remain near current levels until the start of the next winter heating season. The agency is projecting that Henry Hub natural gas prices will average $4.74/MMBtu this year and $4.49/MMBtu in 2015.

"Gas production has more or less stabilized, although the shale component has continued to rise,” said Schlesinger. “There's a depressing effect on conventional gas in areas like Louisiana, Gulf Coast, offshore, that's been fairly pronounced...and I think that when demand, particularly in that region as a result of major new industries -- petrochemical and other gas-using industries, as well as LNG exports -- start to move in that Texas-Louisiana-Gulf Coast region, we're probably going to see all forms of natural gas production come back."

Other highlights of NGI's 1Q2014 Top North American Gas Marketers Ranking include a 20% increase for Southwestern Energy Co. (2.40 Bcf/d from 2.00 Bcf/d in 1Q2013), a 23% increase for CenterPoint Energy. (2.26 Bcf/d versus 1.84 Bcf/d in 1Q2013), and a 22% increase for Atmos (1.33 Bcf/d, compared with 1.09 Bcf/d in 1Q2013).

There was plenty of red ink during the quarter, too. EDF Trading NA reported 6.85 Bcf/d, down 1% from 1Q2013. There were declines also at Chevron Corp. (5.50 Bcf/d, down from 6.47 Bcf/d), JPMorgan (5.43 Bcf/d, down from 6.21 Bcf/d), ExxonMobil Corp. (3.75 Bcf/d, down from 3.92 Bcf/d), Castleton Commodities (3.04 Bcf/d, down from 4.15 Bcf/d) and others.

The survey ranks marketers on sales transactions only. Total combined natural gas purchase and sales volumes were 118,099 TBtu in 2013, down 4.7% from the prior year, according to an analysis by NGI of 2013 Form 552 buyer and seller filings from the Federal Energy Regulatory Commission (see Daily GPI, June 5). Purchase and sales volumes cannot be compared with production because a single package of gas may be sold several times between the wellhead and the burnertip.

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