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Cold Weather Disruptions Lead to Lower US Natural Gas Production in January 2024
03/05/2024
- The U.S. became the world’s biggest LNG supplier in 2023, ahead of Australia and Qatar
- US dry natural gas production dropped to 102 bcfd (Jan 2024) from 106 bcfd (Dec 2023)
- By 2025, production is anticipated to climb over 106 Bcf/d
In January, US natural gas production dropped to 102 billion cubic feet per day (Bcf/d) from December's record of 106 Bcf/d due to bad weather. The Energy Information Administration (EIA) expects it to recover soon, hitting 105 Bcf/d by March. The EIA's outlook for 2024 predicts an average production of about 104 Bcf/d, slightly down from the earlier forecast of 105 Bcf/d. By 2025, production is anticipated to climb over 106 Bcf/d.
"We forecast that mild weather for the remainder of 1Q24 will keep the average Henry Hub spot price near $2.40/mmBtu during February and March. But volatility could return if severely cold weather emerges, even for a short period," the EIA said.
Last month saw a record consumption of 118 Bcf/d in the US, mainly because of high demand from the electricity sector. Even with the expected milder weather in February and March, the EIA predicts a 5% increase in first-quarter consumption compared to the warm early months of 2023.
As for the natural gas market, futures for March delivery dropped by 2.6% to $2.028 per million British thermal units. This decline comes as the market braces for potential colder weather forecasts later in the month, closely watching the $2 price level.
Supply and Demand
In February, gas production in the US Lower 48 states went up to an average of 105.4 billion cubic feet per day (bcfd) from 102.1 bcfd in January. This increase still didn't beat December's record of 106.3 bcfd.
Weather reports expect warmer temperatures in the Lower 48 states until February 13, turning to typical cold levels from February 15 to 21. Due to this expected cooler weather, gas demand in the US, including exports, is predicted to rise from 121.8 bcfd this week to 124.6 bcfd next week. This update changes earlier predictions, lowering this week's demand forecast and raising next week's.
Gas supply to major US LNG export facilities dropped to 13.6 bcfd in February from 13.9 bcfd in January, not reaching December's high of 14.7 bcfd. Analysts believe LNG feedgas volumes won't hit record levels again until the Freeport LNG facility is fully operational, expected by mid- to late February.
Drop in Renewables
The EIA predicts more solar and wind energy in 2024. Solar could go up by 43% and wind by 6%. But, they're expecting a bit less growth in renewable energy for 2025 due to fewer new projects recently.
Growth in energy from fossil fuels like natural gas and coal is slowing down. Natural gas growth is expected to be 2% in 2024, down from 7% in 2023. Coal use is likely to drop by 8%.
Hydropower is expected to rise by 7% in 2024 thanks to more water availability.
In Texas, especially with the Electric Reliability Council of Texas (ERCOT), there's a big expected jump in solar power by 90% and wind by 8% in 2024.
The Midwest might see a big drop in coal energy in 2024, but more natural gas energy should help balance things out. This shows how energy is changing, with less coal and more natural gas and renewables.
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Oil and Gas: Diamondback and Endeavor's $26 Billion Merger Redefines Permian Basin
Diamondback's buyout of Endeavor happened about four months after ExxonMobil and Chevron made huge deals, with Exxon buying Pioneer Natural Resources for $59 billion and Chevron getting Hess for $53 billion. Even though 2023 was a slow year for company buyouts and mergers, with the total deals at $3.2 trillion (the lowest since 2013 and 47% less than the $6 trillion peak in 2021), the energy sector was still active. Experts think this buzz in energy deals is because these companies made a lot of money in 2022.
Welcome 2024: A Look Back at 2023 Top Oil and Gas Sector Deals
2023 was quite a year for the oil and gas sector, with some big deals making the news. In the US, giants like ExxonMobil and Chevron grabbed headlines with their plans to acquire companies like Pioneer and Hess. Internationally, ADNOC wasn't left behind, expanding its reach as well. As we ring in the new year, let's recap the biggest oil and gas deals of 2023.
OXY has been the leader in Permian Basin production for the past five years. Currently, the Houston-based oil and gas company is deepening its presence in the basin with a $12 billion acquisition of CrownRock, adding over 94,000 acres in the Midland Basin and increasing its oil output by about 170,000 barrels per day. Occidental announced an increase in its proved reserves to 4.0 billion barrels of oil equivalent by the end of December 2023, up from 3.8 billion the previous year. Activities in the Permian largely fueled this rise. Occidental added approximately 303 million barrels through infill development projects as well as new discoveries and the further development of existing fields brought in another 153 million barrels.
TotalEnergies kicked off 2024 with a net income of $5.7 billion in the first quarter, marking a modest 3% increase from the same period last year and a 13% rise from the previous quarter. This growth occurred despite experiencing drops in both the volume and price of gas sales over the year and the quarter. Their adjusted net earnings, which exclude one-time or unusual items, were $5.1 billion. This represents a significant 22% decline compared to last year and a slight 2% drop from the last quarter. The company's earnings before tax, depreciation, and amortization reached $11.5 billion, while their cash flow from operations significantly decreased to $2.2 billion, falling by 58% from last year and a steep 87% from the previous quarter. TotalEnergies also recorded $644 million in impairments.
New Mexico leads the Rockies region in gas production and ranks as the sixth-largest in terms of active gas wells in the U.S. Last year, the state's gas well count slightly increased by 0.2% to 30,699, with new additions in both the northwestern San Juan Basin and the southeastern Permian Basin. Meanwhile, just to the north in Colorado, gas producers grew by a modest 0.1% to 30,322, primarily due to increased drilling activity in the DJ and Piceance basins. Wyoming saw a decline in its active gas wells by 3.7%, down to 17,006, with production mainly in Sublette, Sweetwater, and Converse counties reflecting stable or slightly reduced drilling activity. Utah also experienced a slight decrease of 0.2% in its number of gas wells, totaling 6,463. In Q1 2024, oil and gas industry activity in Oklahoma, Colorado, and northern New Mexico experienced a decline. This marks the fifth consecutive quarter of contraction in drilling and business activities within these regions. According to a survey that included responses from 33 firms operating in the Rockies, this downtrend is expected to continue over the next six months.