Smith

Driven by North America’s growing thirst for natural gas and more drilling worldwide, Salomon Smith Barney revised its worldwide rig count forecast upwards by 30% and grew its estimated exploration and production midyear spending projections by 25%, predicting 22% more growth in North America alone. U.S. spending, propelled by aggressive independents, is at a higher pace than at any time in almost 20 years.

Salomon Smith Barney (SSB) said in a weekly E&P report that it expects gas storage injections to continue to strongly outpace last year and consequently put further downward pressure on gas prices in the near-term. Over the long-term, however, SSB expects current underlying supply/demand dynamics will balance out in a price range of $4 to $5/MMBtu.

In stark contrast to outlooks released by Salomon Smith Barney and Lehman Brothers last week that predicted natural gas storage would refill at a record pace during the 2001 filling season, UBS Warburg said it would be a challenge for the industry to refill storage to the 2,800 Bcf mark by November (see Daily GPI, April 5; April 6).

Salomon Smith Barney (SSB) analysts calculate that theunprecedented price surge this winter drove a significant amountmore demand out of the market than previously envisioned. With therecent decline in prices, however, some of that lost demand isreturning to the market.

Salomon Smith Barney said yesterday in a report that it expectstotal equivalent production for its coverage group to be up 3%during the fourth quarter of 2000 compared with 4Q99 and up 1%versus the third quarter. Domestic 4Q gas production from the 41large producers (representing over 50% of total US production) inSSB’s coverage group is expected to be up 2.4% compared with theyear-ago fourth quarter and up roughly 2.2% versus the thirdquarter of this year.

Discounting recent short-term predictions for warmer weather,Salomon Smith Barney added another 75 cents to its gas priceforecast for this year. The prediction now totals $5/MMBtu at thewellhead or about $5.15 at the Henry Hub, but SSB still fears itmay be too low given the storage and gas production situation.

Discounting recent short-term predictions for warmer weather,Salomon Smith Barney added another 75 cents to its gas priceforecast for this year. The prediction now totals $5/MMBtu at thewellhead or about $5.15 at the Henry Hub, but SSB still fears itmay be too low given the storage and gas production situation.

For those who are still scrambling for explanations on why gasprices have reached record levels, Salomon Smith Barney (SSB)meteorologist Jon Davis offered a brief synopsis last week of whathappened with the weather last month. November 2000 was the secondcoldest November in 106 years and it was a complete reversal fromNovember 1999, which was the warmest November in 106 years.

For those who are still scrambling for explanations on why gasprices have reached record levels, Salomon Smith Barney (SSB)meteorologist Jon Davis offered a brief synopsis last week of whathappened with the weather last month. November 2000 was the secondcoldest November in 106 years and it was a complete reversal fromNovember 1999, which was the warmest November in 106 years.