By OGJ editors
HOUSTON, May 20 -- Despite a 20% increase in US drilling activity since April 2003, overall US gas production continues to drop, said St. Petersburg, Fla.-based Raymond James & Associates Inc. in a survey report released Monday.
Survey results covering companies responsible for about 60% of US gas production indicated that first quarter production by publicly traded exploration and production companies this year dropped 4.2% from first quarter 2003 and 0.5% from fourth quarter 2003. The year-over-year change represents a 9.2% plunge in production by the majors and gas utilities, which provide the largest proportion of US supply.
Independents, which increased by 34% their number of rigs working, grew production by only 0.8% year-over-year and actually decreased productionby 0.1% in first quarter this year from fourth quarter 2003.
Although independents are driving the drilling boom, RJA does not foresee them turning production figures around during the next several quarters. "We see no significant near-term catalysts to alter the declining supply picture," RJA said, "and therefore price rationing remains the only viable option to bring the market into equilibrium."
Expected year-over-year production declines of 2-4% should hold average US gas prices to a ratio vs. corresponding oil product prices that is below the traditional 6:1 btu parity, RJA said. "If oil prices remain near the $40/bbl level, that would imply fair value for gas above $7/Mcf."
