Wyoming Natural Gas Production Has Started to Collapse
by Bill Powers, Editor, Powers Energy Investor. January 25, 2010
After receiving many emails after I published my December 1, 2009 issue that discussed the coming natural gas supply crisis of mid-2011, it became very clear to me that there is a great deal of debate regarding the future of natural gas supply. Therefore I decided I would continue to follow-up on my prediction of a supply crisis over the coming months since I believe the cold facts will bear out my prediction. One area that I discussed in my December issue that is likely to be falling faster than I originally predicted is coal bed methane (CBM) production from Wyoming’s Powder River Basin. In fact, after examining recent production data from Wyoming, it has become clear to me that Wyoming natural gas production is in freefall.
According to the January 19th, 2010 issue of Platts Gas Daily, the Wyoming Oil and Gas Conservation Commission reported that natural gas production fell 9% in 2009 to 2.1 trillion cubic feet (tcf). A drop of 9% for Wyoming represents a decline of 517 million cubic feet per day (mmcf/d) of lost production. Last year was the first year since 1997 that natural gas production declined in Wyoming. To put Wyoming’s 2009 gas production decline in context, just the lost production from the state last year was more than the average daily output in 2009 from the following highly regarded unconventional shale basins: the Marcellus Shale, the Woodford Shale, the Eagleford Shale, Canada’s Montney Shale and Canada’s Horn River Basin.
While Wyoming averaged 5.7 billion cubic feet (bcf) of production in 2009, the top five producers in the state saw their production fall over 10%. The below table summarizes the decline from the state’s five largest producers in 2008:
Wyoming Gas Production 2009 – Largest 5 Producers
|Producer||% Change||Production Change||2009 Production|
|EnCana||-11%||-108.2 mmcf/d||327 BCF|
|Exxon||-13%||-88.2 mmcf/d||211 BCF|
|Ultra Petroleum||17%||84.9 mmdf/d||209.5 BCF|
|BP||-13%||-70.4 mmcf/d||167.3 BCF|
|Williams||-15%||-55.3 mmcf/d||117.5 BCF|
Source: Platts Gas Daily, January 19, 2010, Wyoming Oil and Gas Conservation Commission
More importantly, according to the Baker Hughes drilling data that was released on January 22nd, there were only 37 rigs drilling in Wyoming in mid-January. Even if we assume all of those rigs were drilling for gas, this is nowhere close to enough rigs to keep the state’s production from collapsing over the next two years. The current rate of natural gas drilling in Wyoming does not support even 1 bcf per day of production let alone over 5 bcf per day. While shut-ins during the fall undoubtedly negatively impacted Wyoming’s 2009 production, lack of drilling and the maturity of the state’s largest fields have put its natural gas production on a downward spiral that will not be interrupted any time soon.
While many market observers have yet to recognize the significant production declines of states like Wyoming, there is little doubt that other states such as Texas, Colorado and New Mexico are on the verge of severe declines in gas production. Savvy investors should use the current general stock market weakness to position their portfolios into gas-weighted companies that are situated to profitably grow production this year.
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© 2010 Bill Powers