Continued low prices for natural gas, which is the single largest source of revenue for Wyoming, have forced Gov. Matt Mead to ask state agencies to prepare budget cuts of up to 8%.
“We are still in a strong place, in terms of our ability to avoid dipping into savings. But we should have the discussion about whether we want to build savings at the same rate as we did during the boom times,” Mead said.
A report issued Monday by Wyoming’s Consensus Revenue Estimating Group (CREG) estimated that total state revenues for fiscal years 2013 and 2014 lag more than $30 million behind forecasts made in 2011. Contributing to the state’s revenue shortfall is the relatively low price of natural gas.
“Despite a historically warm winter across much of the nation and record natural gas storage and production levels which serve to depress market pricing, natural gas continues to be the most significant component to Wyoming’s mineral revenue stream, accounting for 44.4% of the state’s most recent assessed minerals valuations [for 2011].”
Historically, gas prices have demonstrated some stability at about $4.00/MMBtu, and “there appears to be a consensus among intermediate and long term gas price forecasts around that pricing level,” CREG said. “The larger and more complex question is the timing markets will require to return to that level.
“Specifically, until demand increase — as a result of more robust economic growth, weather, or identification of new markets — the notion of adequate supplies, or even an over-supply, keeps the forecast below this $4.00/MMBtu range until CY [calendar year] 2014. Beyond that, CREG forecasts prices to roughly maintain the $4.00/MMBtu price for the balance of the forecast period.”
The group also estimated Wyoming’s natural gas production at 2.27 Tcf in 2012 and again in 2013, with a 2% increase expected in 2014 (2.32 Tcf) and 2015 (2.36 Tcf). “The increase in production is aligned with the anticipated return to $4/MMBtu natural gas in CY 2014,” CREG said.
Wyoming produced 6.10 Bcf/d in July and 6.17 Bcf/d in June, according to a recent report from the U.S. Energy Information Administration (see Daily GPI, Oct. 1).
CREG said oil production in the state, while below levels of the 1980s, has increased since 2009 and continues to increase. “Specifically, the oil production forecast has increased by 3 million barrels in CY 2012, to 57.0 million barrels.” CREG estimates that Wyoming’s oil production will increase by another half million barrels in 2013 and 2014, reaching 58.5 million barrels by 2015.
Wyoming Oil and Gas Conservation Commission (WOGCC) records indicate that drilling activity is on the upswing in the state’s Powder River Niobrara. The state received 77 oil and gas permit applications in July, a 51% increase from 51 in July 2011, according to WOGCC data. Another 58 drilling permit applications were received during the first 16 days of August; a total of 66 applications were received in all of August 2011.
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