By OGJ editors
HOUSTON, Feb. 24 -- The US appears on the verge of another major natural gas supply shortage, Raymond James & Associates Inc. said upon receiving full results from a fourth quarter 2002 US natural gas production survey of 37 companies.
"Indications are that US natural gas production has declined by 2.7% sequentially and 6.4% year-over-year," said RJA analyst Marshall Adkins.
Previously, based upon results from 29 companies, RJA had forecast a 0.6% decline by quarter sequentially and a 4.6% decline on a YOY basis (OGJ, Feb. 10, 2003, p. 7).
"Of course, these surveys are not a perfect indication of what is to come, but they do tend to illustrate the magnitude of the larger trend to which we preach: natural gas production in the United States continues to decline at a steady pace both sequentially and (YOY) at the tune of 1.0-1.5% and 6-7%, respectively," Adkins said.
But fourth quarter 2002 US gas production declined more than usual primarily because of hurricane-related production volume losses.
"That said, production declines in the first quarter. . .will most likely return to the more typical 1.0-1.5% sequential, 6-7% (YOY) declines to which we have become accustomed until drilling activity levels increase substantially," Adkins said.
While activity levels bottomed in late March-early April 2002, exploration and production cash flows and spending remained relatively flat until the last few months, he said. "While the gas rig count remains well above historical averages of the last decade, it is down from the peak of 1,068 rigs in 2001," Adkins noted.
Even if drilling activity resumed the pace of 2001, it still would take at least 3-6 months before new production would begin to counter overall volumes being lost because of the natural declines in existing wells, he said.