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Progress Energy to shut in natural gas production
February 8, 2012 / 4:00 PM / 6 years ago

Progress Energy to shut in natural gas production

* Cuts 2012 capital budget by C$100 mln

* Shuts in 10 percent of natural gas production

* First Canadian gas producer to announce shut-ins

* Says reserves grew by 28 pct last year

* Shares fall 0.8 pct

CALGARY, Alberta, Feb 8 (Reuters) - Progress Energy Resources Corp, which has partnered with Malaysia’s Petronas to develop its shale-gas holdings in northeastern British Columbia, will cut spending on developing its natural gas reserves and shut in 10 percent of its gas production until prices recover.

In a release issued late on Tuesday, Progress said it will trim its 2012 capital spending by C$100 million ($100.5 million) from year-earlier levels to C$365 million as natural gas prices hover near decade lows as a mild winter in much of North America cuts into demand.

“We believe the current low natural gas price is unsustainable,” Michael Culbert, the company’s chief executive, said in a statement. “Shifting capital to preserve asset value and maintain our balance sheet strength is prudent in this environment.”

Progress plans to hold off on bringing some recently drilled wells into production and to shut in about 10 percent of its gas production, which averaged 224.6 million cubic feet per day in the third quarter.

While Chesapeake Energy Corp and ConocoPhillips have said they will reduce their gas output in the United States because of low prices, Progress is the first Canadian company to announce similar measures. Analysts expect other producers to follow.

“This represents the first major move by a Canadian producer in terms of shutting in material gas volumes, we expect major players such as (Encana Corp) to follow suit when they release their year-end results next week,” Matt Donohue, an analyst at UBS Securities, wrote in a research note.

Despite the cut, Progress said it and Petronas will spend up to C$341 million developing their North Montney joint-venture project in northeastern British Columbia.

The company expects to end 2012 producing between 53,000 and 55,000 barrels of oil equivalent per day, up from 50,000 boepd at the end of 2011.

Progress also said its proved and probable reserves grew 28 percent last year to 323 million barrels of oil equivalent.

The company’s shares were 9 Canadian cents lower at C$10.67 at midmorning on Wednesday on the Toronto Stock Exchange.

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