US gas producers mull output cuts on lower prices

Large US natural gas producers are delaying well completions and considering curtailing output as a persistently oversupplied domestic market weighs on prices.

EQT, the largest US gas producer by volume, in July said it had been holding back production for weeks in response to lower prices, and planned to continue curtailing output through autumn.

"It's in response to the market," EQT chief financial officer Jeremy Knop said. "If we can make money selling gas, we wouldn't curtail anything."

EQT plans to curtail about 490mn cf/d (14mn m³/d) of natural gas equivalent (cfe) in the second half of 2024, with the majority of the curtailments taking place in September and October. During those so-called autumn "shoulder months," gas prices tend to be lower than during the winter, when more gas is burned to heat homes, and the summer, when gas is burned to generate electricity to run air conditioners.

Coterra Energy earlier this month said it expects to curtail about 275mn cf/d of gas production in the Marcellus shale in Pennsylvania and the surrounding states, with its chief executive Thomas Jorden citing an oversupplied market as the reason. The industry does not need $5/mmBtu gas prices, he said, but it does need prices closer to $3.50/mmBtu to incentivize bringing incremental gas to market.

The September-October strip price for Nymex gas at the US benchmark Henry Hub on 9 August settled at $2.218/mmBtu, compared to the November-December price of $3.031/mmBtu.

Seneca Resources and Antero Resources this month also said they were delaying completion activity and mulling further output cuts if the outlook for US gas prices did not improve.

Chesapeake Energy, which reported second-quarter production that was 760mn cf/d lower than the year-earlier quarter, said it would curtail further production if prices were to decline "materially." Like EQT, Antero and other large producers, Chesapeake choked back output in the spring, only to restore much of the curtailed production when prices rebounded in late May as summer heat boosted demand. Those restorations now appear liable to be reversed.

North of the US border, some Canadian producers have also vowed to rein in output on lower prices across the region. The two markets are highly connected by pipeline, through which the US buys almost half of Canada's gas production. Canadian gas producer Arc Resources earlier this month said it would curtail about 250mn cf/d of gas production to "preserve value for periods when prices were higher." Tourmaline Oil, Canada's largest gas producer, lowered its full-year production guidance slightly, in part so it could shift some production to the winter, when gas prices were expected to be higher.

By Julian Hast