TEXT-S&P: U.S. natural gas will likely stay below $4 in 2013

Wed Dec 5, 2012 11:26am EST

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Dec 5 - North American gas production will likely remain flat to slightly
down in the next 12 months, but Standard & Poor's Ratings Services sees few
catalysts for a pick up in demand, according to a published report titled "The
Recent Jump In U.S. Natural Gas Prices Isn't Likely To Entice Oil And Gas
Exploration And Production Companies."

Gas prices are likely to remain below $4 per thousand cubic feet (mcf) in 2013 
unless the supply-demand dynamic changes significantly. Prices have rebounded 
88% since April to about $3.45/mcf on the New York Mercantile Exchange from 
$1.84/mcf. More meaningful for oil and gas exploration and production (E&P) 
companies planning their capital budgets, the forward-12-month price (or the 
price companies pay for future deliveries) now averages $3.23/mcf, up from 
$2.56 in April.

"Although prices have gained some lost ground, they remain substantially lower 
than before the economic crisis of 2008. Gas is now more abundant and 
industrial and commercial demand is stagnant," said Standard & Poor's credit 
analyst Ben Tsocanos.

E&P companies have moved drilling rigs out of areas that hold mainly natural 
gas reserves and into regions bearing more profitable crude oil and natural 
gas liquids. The number of rigs drilling for natural gas dropped to 413 from 
877 a year ago. Production, however, has not fully reflected the effect of the 
shift, and we expect 2013 gas output in the U.S. to be about the same as this 
year's--even though the pace of drilling new gas wells slowed.

 

The report is available to subscribers of RatingsDirect on the Global Credit 
Portal at www.globalcreditportal.com. If you are not a RatingsDirect 
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 
or sending an e-mail to research_request@standardandpoors.com. Ratings 
information can also be found on Standard & Poor's public Web site by using 
the Ratings search box located in the left column at www.standardandpoors.com.
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