shaleprofile + 242 March 22 Impact of Gas Price Drop on Operators Henry Hub gas prices have witnessed a significant decline from their November peak of approximately $3.50 per Mcf, reaching near-record lows of around $1.60 per Mcf. This drastic shift has prompted operators in major gas basins to respond by reducing rigs and, in some instances, voluntarily shutting down production. For instance, EQT announced in early March its decision to shut in 30-40 Bcf of production during the first quarter of 2024. Concerns in the Industry Given the persistently low gas prices, there is widespread concern within the industry about the ability of Haynesville operators to generate attractive returns. Many question whether any operators in this basin can achieve profitability in such a challenging environment. Ranking of Top Ten Operators To shed light on this issue, we have compiled a list of the top ten operators in the Haynesville basin based on their breakeven points. Breakeven is defined as the flat Henry Hub price required to generate a two-year payout period, which is colloquially considered the benchmark for achieving a good return on capital for shale wells. Highlights GEP Haynesville II (GEP II) takes the top spot: Among the top ten operators, GEP II ranks the best with a two-year average HH breakeven of ~ $2.70/Mcf, followed by EXCO (~ $3.20/Mcf), C6 Operating ($3.28/Mcf), and Southwestern ($3.53/Mcf). We highlight that none of the operators come close to generating average two-year payouts at sub-$2 gas. Sub $2 breakevens are rare: In the last three years, GEP II, Southwestern, Chesapeake, and Comstock drilled only one well each, which we estimate broke even at sub $2/Mcf gas. Louisiana outranks Texas on a half-cycle basis: Operators with a more Louisiana-focused asset base tend to have better breakevens and payout periods than peers on the Texas side of the border. Implications for Tellurian: Tellurian screens poorly on a 2-year breakeven metric, and we estimate it ranks 18th in the basin. This, coupled with historically low gas prices, will make a successful sale of Tellurian’s upstream assets difficult. Figure 1. Two-Year HH Breakeven by Operator ($/Mcf) (2021-2024) (This represents the flat HH price needed for a well to break even in two years. Each dot represents a well) Source: Novi Insight Engine, Novi Intelligence. Note: All wells with breakevens over $10/Mcf were removed. Only the 2021-2024 vintages were used in this analysis. Quote Share this post Link to post Share on other sites
notsonice + 1,080 DM March 22 (edited) 7 hours ago, shaleprofile said: Impact of Gas Price Drop on Operators Henry Hub gas prices have witnessed a significant decline from their November peak of approximately $3.50 per Mcf, reaching near-record lows of around $1.60 per Mcf. This drastic shift has prompted operators in major gas basins to respond by reducing rigs and, in some instances, voluntarily shutting down production. For instance, EQT announced in early March its decision to shut in 30-40 Bcf of production during the first quarter of 2024. Concerns in the Industry Given the persistently low gas prices, there is widespread concern within the industry about the ability of Haynesville operators to generate attractive returns. Many question whether any operators in this basin can achieve profitability in such a challenging environment. Ranking of Top Ten Operators To shed light on this issue, we have compiled a list of the top ten operators in the Haynesville basin based on their breakeven points. Breakeven is defined as the flat Henry Hub price required to generate a two-year payout period, which is colloquially considered the benchmark for achieving a good return on capital for shale wells. Highlights GEP Haynesville II (GEP II) takes the top spot: Among the top ten operators, GEP II ranks the best with a two-year average HH breakeven of ~ $2.70/Mcf, followed by EXCO (~ $3.20/Mcf), C6 Operating ($3.28/Mcf), and Southwestern ($3.53/Mcf). We highlight that none of the operators come close to generating average two-year payouts at sub-$2 gas. Sub $2 breakevens are rare: In the last three years, GEP II, Southwestern, Chesapeake, and Comstock drilled only one well each, which we estimate broke even at sub $2/Mcf gas. Louisiana outranks Texas on a half-cycle basis: Operators with a more Louisiana-focused asset base tend to have better breakevens and payout periods than peers on the Texas side of the border. Implications for Tellurian: Tellurian screens poorly on a 2-year breakeven metric, and we estimate it ranks 18th in the basin. This, coupled with historically low gas prices, will make a successful sale of Tellurian’s upstream assets difficult. Figure 1. Two-Year HH Breakeven by Operator ($/Mcf) (2021-2024) (This represents the flat HH price needed for a well to break even in two years. Each dot represents a well) Source: Novi Insight Engine, Novi Intelligence. Note: All wells with breakevens over $10/Mcf were removed. Only the 2021-2024 vintages were used in this analysis. new additions of gas fueled power plants is stagnant and utilization rates will be impacted moderately as the solar farm boom picks up speed.....net gas consumption moving forward looks like it will rise only on cannibalization of existing coal powered plants. This cannibalization is slowing now as the amount of coal power plants left is 40 percent of the peak...Efficiencies increases in CCGT plants has a negative effect on gas consumption...... Nat gas is at a crossroad..........solar is going to keep the upside on Nat Gas to 3.00 to 3.50 range for the long run. $4 nat gas ??? better chances of winning playing the tables in Vegas the cheap solar panels, government tax credits and solar panel efficiency gains from the 20 percent today to up to 25 to 30 percent in the next 5 years is not the friend of Nat Gas Myself , I think peak gas consumption is here already excluding exports too much production and no net demand increase...... $2 to 2.50 gas is here for the next 2 years drilling for gas today ??????? better have costs under tight control and future contracts in place today at $3.50 otherwise losing money is in the cards....better to park the rigs today and hope for a decrease in supply and constant demand....... In 2025, EIA projected output would rise to 104.43 bcfd. The agency also projected those low gas prices would boost domestic gas consumption from a record 89.09 bcfd in 2023 to 89.68 bcfd in 2024 before easing to 89.21 bcfd in 2025 as prices rise.Mar 12, 2024 US natgas output to decline in 2024 while demand ... - Reuters Edited March 22 by notsonice 1 Quote Share this post Link to post Share on other sites
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