Ultra sees supply-driven natgas price bounce next year

Sept 24 Mon Sep 24, 2012 3:05pm EDT

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Sept 24 (Reuters) - U.S. natural gas producer Ultra Petroleum Corp believes natural gas prices are on the cusp of a recovery driven by industry-wide supply cutbacks, and that higher prices should start to take hold next year - assuming a normal winter.

An abnormally warm winter in the United States last year was a major reason why the market was left with a glut that pushed natural gas prices below $3 per million British thermal units (Btu), Ultra Chief Executive Mike Watford said on Monday.

He saw signs that efforts by the industry to reduce gas output were finally taking hold, even though Ultra's production for 2012, at 250 billion to 260 billion cubic feet, would end up being higher than its 245 billion in 2011.

"We're forecasting production growth, and I'm really unhappy with that," he said at the Oil and Gas Investment Symposium in San Francisco, hosted by the Independent Petroleum Association of America. "You just can't turn this stuff off quickly."

But Watford said he believes Ultra, as well as the industry, will manage to lower production in 2013 - "which is what we need."

U.S. benchmark natural gas prices are down by nearly a quarter in the past year. Watford said prices were less likely to reverse once they started rising because operators would be reluctant to put rigs back on quickly, even at $4 per Btu.

Asked why Ultra, for which gas makes up 98 percent of its production, did not invest more heavily in liquids, Watford said nothing that was available to the company made economic sense relative to the potential of its natural gas properties.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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