Several large US natural gas producers are not planning to increase output in response to a substantial rise in prices ahead of a prolonged period of cold weather forecast to blanket the US this month.
Executives at Expand Energy, the largest US gas producer by volume, have been fielding lots of questions lately about whether the company is going to ramp up activity to meet increased heating demand from the Arctic blast sweeping the eastern and southern US, and "the answer is no," Expand chief executive Nick Dell'Osso said today at the Goldman Sachs Energy, CleanTech and Utilities conference in Aventura, Florida. "Nothing has changed for us."
Near-term US gas prices would probably have to exceed $5/mmBtu for producers in the Haynesville shale in east Texas and northern Louisiana to bring "significant" new output on line, said Gordon Huddleston, president of Aethon Energy, the largest privately held US gas producer. Beyond near-term price shifts, Huddleston emphasized the importance of the price strip for delivery in the 2025-26 winter heating season, since it takes 9-12 months to bring gas production to market from a new drilling rig. That strip does not suggest Haynesville producers should be ramping up activity, he said.
"We don't want to get out in front of the demand pull," he said.
Nymex gas prices at the US benchmark Henry Hub in Louisiana for February delivery on Monday settled at $3.672/mmBtu, up by 25pc from a month earlier. Prices for next winter heating season, from November 2025 to March 2026, on Monday settled at $4.181/mmBtu, up by 4.6pc from a month earlier.
Any mismatch between supply and demand needs to persist for long enough that producers can reap the benefits of bringing additional supply on line, Dell'Osso said. If Expand were to add a rig today, the company would continue to yield output from that rig "at least 12 months later," when it would need time to earn a return on it, he said. This would likely require higher prices further into the future.
"You don't want to grow for a season," Dell'Osso said. "You want to grow for something that is durable over several years."
US gas inventories last week were at a 154 Bcf (4.4bn m³), or 4.7pc, surplus to the five-year average, according to the most recent government storage report. This compares to a 214 Bcf surplus at the start of this winter and a 633 Bcf surplus at the end of last winter, which prompted large gas producers like Expand and EQT to slash output. Today, there is probably not any active curtailment of producers' gas volumes, Dell'Osso said.
The shrinking US gas storage surplus should lift prices through 2025-26, Bank of America analysts said today.
Dell'Osso said he was more optimistic about the durability of the 5.6 Bcf/d demand increase slated to come on line through the end of 2026 resulting from operations at three new LNG export projects on the US Gulf coast: Plaquemines, Corpus Christi phase 3 and Golden Pass. To meet that demand with incremental production from the Haynesville, which is the marginal US gas producing basin, prices will have to significantly and durably exceed $3.50/mmBtu, which is the breakeven price for most producers there, he said.
