Medium-sized U.S. oil and natural gas producers forecast higher production for this year, with some of them set to outspend their cash flows, when many of their bigger rivals are cutting output citing decade-low gas prices.
Natural gas prices, which traded at $11 per million British thermal units (mmBtu) levels three years ago, are now languishing at $2.67, as production from unconventional shale fields flood the market.
The glut has prompted top companies such as Chesapeake Energy (CHK.N) and Encana Corp (ECA.TO) to cut their gas output and arrest a steep fall in their share price.
Smaller companies such as Bill Barrett Corp (BBG.N), meanwhile, are banking on hedging to make up for weak prices.
"We are well positioned to meet the challenges of 2012 with approximately 62 percent of our projected natural gas production hedged at $4.08 per thousand cubic feet on average...," Bill Barrett Chief Executive Fred Barrett said in a statement.
Swift Energy SFY.N, Gulfport Energy (GPOR.O), Denbury Resources (DNR.N), LINN Energy LINE.O and Bill Barrett are all looking to boost production this year.
Wells Fargo Securities analysts wrote in a note that they were "neutral" to "negative" on Swift Energy, partly because of its "gassier mix" in its production outlook.
These companies, nevertheless, are directing most of their spending towards liquid assets in fields ranging from Bakken in North Dakota to the Eagle Ford in Texas.
"Having fulfilled our near-term obligations on most of our acreage prospective for dry natural gas production in South Texas, we will be concentrating on our higher return, liquids-rich acreage almost exclusively this year," Swift Energy Chief Executive Terry Swift said.
Partly because drilling for oil tends to be costlier than for gas, companies such as Bill Barrett and Newfield Exploration (NFX.N) are set to outspend cash flows from their operations.
Oklahoma City-based Gulfport sees 2012 production to be up 28 percent to 37 percent, while Swift Energy is targeting a 14 percent to 20 percent increase.
Denver, Colorado-based Bill Barrett is looking for an 18 percent to 22 percent jump in its oil and natural gas production this year.
Denbury Resources said its 2012 total production would be 70,250 barrels of oil equivalent per day (boe/d) to 75,250 boe/d, compared with an average annual production rate of 65,660 boe/d for last year.
The Dow Jones U.S. Exploration & Production Index .DJUSOS was up 0.33 percent on Thursday morning.
(Reporting by Vaishnavi Bala, Krishna N Das and Durba Ghosh in Bangalore)