East Daley Capital Advisors, Inc., an energy assets research firm redefining how markets view risk in midstream and exploration and production (E&P) companies, released a new report signalling the need for a major correction to US natural gas prices due to prolific production expectations from the Marcellus and Utica shale formations in the northeast, which is now clashing with growth expectations in the Permian region in the midcontinent. The newly released Part Two of the report, ‘Righting A Wrong: The Marcellus/Utica Balanced on a Knife’s Edge’, dissects the interconnection between energy market fundamentals and a company’s financial performance to create a unique and comprehensive market outlook.
“Given the current forward curve, US natural gas supply and demand are extremely unbalanced, with total US supply outpacing demand by a staggering 11 Bcf/d by the end of 2019,” said Justin Carlson, VP and Managing Director, Research at East Daley Capital. “This signals a necessary price correction to incentivise incremental natural gas demand to help absorb the new production, much of which is expected to be produced in the northeast and the Permian.”
Part One of this report focuses on growth limitations in the northeast Marcellus. Part Two of this report analyses southwest Marcellus and Utica as well as the implications on the rest of the country due to production growth in the northeast. Producer guidance in the northeast suggests production will grow by 14.5 billion ft3/d by 2019. However, the Marcellus and Utica are not without competition as East Daley expects fundamentals will slash northeast growth to 11 billion ft3/d as natural gas prices adjust to accommodate surging associated gas production in the Permian. The implications of this analysis also extend to investors, midstream companies and commodity market players outside the region as the Marcellus and Utica will put substantial pressure on other producing regions.
“Basins like the Rockies, Haynesville and the Fayetteville need to pay close attention to what happens in the Northeast as those tier 2 and tier 3 basins are facing an uphill battle for market share and will most likely need to reduce their growth and earnings expectations,” said Carlson. “The US natural gas market is entering into an intense era of gas-on-gas competition where only the best positioned will survive.”
East Daley’s asset-level allocation model, combined with in-depth analysis, brings greater transparency to the midstream energy financial market by providing investors with deeper, more accurate data to inform their investment decisions.
Read the article online at: https://www.worldpipelines.com/business-news/09062017/east-daley-report-signals-the-need-for-major-correction-to-us-natural-gas-prices/