Shale companies are rising their drilling activity and their output, as natural gas prices are expected to grow substantially on 2021, as this commodity hasn’t been hit so hardly as crude oil.
This is a noticeable change from past practices and a reminder for the Organization of the Petroleum Exporting Countries (OPEC) of how the industry is moving and behaving, amid a 45% forecast grow for natural gas prices, and just a 15% grow for Brent, for 2021.
In the midst of OPEC’s meeting this Tuesday, where they’ll discuss weather to extend oil production cuts into the first months of 2021 or not, this market behavior serves as an attention point for investors and industry protagonists as well.
EOG Resources, one of top U.S shale producers, recently announced that, in 2021, it’ll start selling gas from 15 new wells; such wells were just recently discovered with a 21 trillion cubic feet gas reserve.
Also, Continental Resources, shifted recently all of its oil wells to shale natural gas drilling in Oklahoma, as reported by Reuters. Apache Corp., announced this month its plans to complete three Texas wells after increasing its U.S. gas production by 15%, during 2020’s second quarter.
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To shale producers drive, there’s also LNG
Christopher Kalnin, chief executive of Denver-based Banpu Kalnin Ventures, said to Reuters: “Demand has remained pretty robust. Supply has been starved for capital.” Kalnin Ventures just last month closed a deal to acquire Devon Energy’s natural gas assets, after hedging 65% of its gas production for next year.
According to data from Baker Hughes, the number of U.S. natural gas drilling rigs climbed 13% to a total of 77 since July. Also, about a quarter of all U.S. active drilling rigs are committed to natural gas production; which is equal to a 16% increase compared to last year.
On top of this drive, there’s also the expanding liquified natural gas (LNG) shipments. According to the latest Energy Information Administration forecast, LNG exports could average 8,4 billion cubic feet per day in 2021, a 31% increase from 2020.
Finally, according to Reuters, producers have doubled their hedges since March, locking future prices; they’ve already covered 53% of next year’s output compared with the 43% of oil.
“Natural gas has not been hit as hard as crude by the pandemic. For those that have some diversity in their assets, it can help them weather the storm,” said to Reuters Bernadette Johnson, vice president at Enverus.