The Daley Note: August 31, 2023
Gas flows have been sliding in pipeline samples from the Anadarko Basin, suggesting that slowing rig and completion activity could be taking a toll on production.
Anadarko Basin pipeline samples tracked by East Daley Analytics have averaged 3,726 MMcf/d to date in August, down nearly 6% M-o-M. Anadarko samples in August have trended to the lowest point of the year, down nearly 18% since the start of 2023 (see figure).
Pipeline scrapes are an imperfect measure of trends in the Midcontinent, accounting for about 55% of regional natural gas production. These surveys do not capture deliveries to intrastate systems in Oklahoma and Texas, and flows can shift with swings in local demand.
Nevertheless, other evidence points to declining supply. Anadarko rig counts have fallen in 2023 along with lower natural gas prices. Rig counts in the basin have averaged 42 so far in August, according to East Daley’s Energy Data Studio, down from an average of 69 rigs in January 2023.
Midstream operators are starting to report impacts from the slowdown. Producers are deferring completion work on new wells in hopes of waiting out low gas prices, according to EnLink Midstream (ENLC). On its 2Q23 call, executives said some operators on ENLC’s Central Oklahoma (COK) system have been building inventory of drilled but uncompleted wells (DUCs) in anticipation of more favorable prices this winter.
EDA’s current outlook is for Anadarko gas production to hold flat in the near term. We model gross gas production of ~8.8 Bcf/d in the basin through the end of 2023, according to Energy Data Studio. We expect Anadarko gas production to decline in 2024 as lower rig activity leads to fewer new well connects, down nearly 0.5 Bcf/d on average vs 2023 (see figure). The latest market updates point to some downside risk to the near-term outlook for the Anadarko. – James Taylor and Andrew Ware Tickers: ENLC.
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