Results from a 43-company survey have led analysts at Southwest Securities to believe domestic gas production may actually show a sequential increase for the second quarter compared to first quarter levels, but still will be down sharply compared to levels during the same quarter last year. In contrast, the Energy Information Administration (EIA) predicts that production ended the quarter flat sequentially and year-to-year.

“Our U.S. natural gas production survey suggests natural gas production increased 0.6% (quarter to quarter) and declined 4.6% (year over year) in 2Q04 primarily [because of] a sustained elevated gas rig count and significant incremental gas volumes from deepwater [Gulf of Mexico] projects,” Southwest’s Chris Clark said. However, he still expects production to end the year down 3.4% compared to 2003 levels.

The higher than expected second quarter volumes is “mildly bearish to our near-term gas price outlook,” Clark added, but “further supports our longer term price forecast of $4.75/MMBtu.”

Analysts at Raymond James & Associates said Monday that they believe the rig count is poised to surpass previous peak levels. Citing data from the Land Rig Newsletter Raymond James analyst said there currently are 1,323 active U.S. land rigs, about 60 more than were active during the July 2001 peak. Baker Hughes said the current land rig count at 1,111 is just two shy of the July 2001 peak.

Meanwhile, the EIA is predicting that dry gas production ended the second quarter at 4.75 Tcf, the same as production levels in the first quarter of this year and second quarter of 2003. EIA expects production to end the year up 0.4% at 19.15 Tcf.

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