By OGJ editors
HOUSTON, Apr. 3 -- US natural gas production is on the decline, and the decline is accelerating rapidly, according to preliminary results of a Raymond James & Associates Inc. first quarter survey of 30 of the largest US natural gas producers.
On a year-over-year basis, US gas production is projected to be down by 2.9% in the first quarter of 2002, said Wayne Andrews, RJA analyst. The producers surveyed represent 45% of US gas production.
"First quarter US natural gas production declined by 1.8% from the fourth quarter of 2001. This is significantly higher than the 1.3% sequential decline from the third to fourth quarter in 2001," Andrews said.
Supply is declining much faster than most analysts expected, Andrews said. US gas production trends generally lag the rig count by 3-6 months, but last year, US gas production began showing declines before drilling activity peaked in July.
Producers were drilling wells that they could bring on production quickly at high flow rates. With activity on these types of prospects now halted, production from high-flow-projects likely will be down by 30-40% this year, he projected.
"As a result, sequential production declines should continue to gain momentum as the year progresses, and we continue to believe that US natural gas production could be down by as much as 5-6% this summer on a year-over-year basis," Andrews said.
RJA has increased its 2002 Henry Hub natural gas price forecast from $3.25/MMbtu to $3.45/MMbtu. The analyst raised its second quarter gas price forecast from $2.80/MMbtu to $3.50/MMbtu and its third quarter gas price forecast from $3.65/MMbtu to $3.75/MMbtu.