Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )

Operators reducing operating expenses to match price downswing

ECI Natural Gas Production and Prices

Natural gas production has continued to rise over the last nine years, steadily pushing down the price of natural gas at Henry Hub, and putting increasing pressure on companies’ cash margins. The above chart looks at five companies in the Marcellus, illustrating the downward trend in Henry Hub prices and cash margins as production increases. The five companies tracked in EnerCom’s analysis are Cabot Oil & Gas (ticker: COG), Encana (ticker: ECA), EQT Corporation (ticker: EQT), Range Resources (ticker: RRC) and Southwestern Energy (ticker: SWN).

Increased efficiencies have allowed for higher production with lower operating costs, allowing companies to continue profiting despite lower prices. ”Increased efficiencies not only affects the bottom line, but longer laterals, increased frac stages, and lower well completion costs can all help drive the production higher with less capital outlay,” according to EnerCom Analytics.

Greater efficiencies are likely to remain an important part of gas production, too. Prices are expected to stay relatively low in the long-run. If companies hope to remain competitive, they’ll need to continue lowering their operating expenses in order to maintain healthy cash flow.

ECI Natural Gas Price Prediction


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.