Natural Gas Summary for Week Ending February 24

Submitted by The City Wire staff on Mon, 03/02/2009 - 9:41am.

The monthly “Natural Gas Market Indicators” report from the American Gas Association provides some glimpse into the factors behind the thousands of jobs in Arkansas and the Fort Smith region tied to the exploration, production, transmission and management of natural gas.

Natural gas prices at the closely watched Henry Hub — a connecting point of 13 pipelines in south-central Louisiana — fell below $4.25 mmBtu, according to the AGA February 25 report.

The price reflects a downward trend that is causing financial pain for exploration and production companies — including some of those active in Arkansas’ Fayetteville Shale Play — that made investment and exploration decisions based on a higher price.

Falling natural gas demand in the nation’s manufacturing sector, moderate weather and large amounts of gas in underground storage have caused the price decline, AGA noted in the report. Unfortunately, the AGA notes that most futures contracts have natural gas priced below $6 per mmBtu.

Other key metrics of the AGA report include:
• Working Gas in Underground Storage
Net storage withdrawals for the week ending Feb. 13, were only 24 Bcf (billion cubic feet), which is significantly less than the 172 Bcf withdrawn at this time last year. At 1,996 Bcf, working gas remaining in underground storage has jumped to 9.7% above the volume one year ago and 8.4% higher than the five-year average.

• Natural Gas Production
After averaging 55.6 Bcf per day for the 10-day period Feb. 15-24, natural gas production prior to extraction losses is down about 1 Bcf per day compared to the
first two weeks of the month. However, average daily production prior to extraction losses for February 2009 (56.2 Bcf per day) is 5% higher than in February 2008 (53.7 Bcf per day).

• Rig Counts
Total national rig counts for the week ending Feb. 20, stood at 1,300, having tumbled 36% from 2,031 rigs in late summer 2008. At 1,018, gas-directed operations are down 29% from one-year earlier. However, rigs operating today described as drilling horizontal wells (like many of those in the Fayetteville Shale Play), which tend to be newer and more efficient drilling systems, numbered 475 on Feb. 20. One year ago that number was 464. This also tends to support the notion that operations in less conventional reservoirs remain relatively solid.