The Daley Note: March 17th, 2023
East Daley Analytics has made a conviction call for gas oversupply in 2023, and we are monitoring real-time rig data alongside guidance to see when E&Ps will respond. Pure gas plays are most at risk under these conditions, making both the Northeast and Haynesville targets for production cuts later this year.
Most Northeast producers remain in ‘maintenance mode’ and are guiding to steady output in 2023, leaving some room for single-digit declines or gains in the Marcellus and Utica shales.
EQT (EQT) and Range Resources (RRC) acknowledged some flexibility and potential supply response if prices change. EQT guided to flat production at the midpoint, with prices to dictate any deviation. RRC guided to backloading more of its production toward the second half of 2023 to capture stronger prices in the forward strip.
Depending on the severity of the imbalance, producers could eventually shut-in wells later this year if gas prices stay low. In 2020, we saw EQT respond to poor spot pricing by shutting in one-third of its production when Dominion South prices fell below $1.40/MMBtu. On the other hand, Antero Resources (AR) claimed resilience to low prices in Appalachia, given a strong portfolio of firm transport (FT) on pipelines out of the basin and low break-even economics for its acreage. EQT noted that while some of its peers were slimming their FT capacity, EQT was expanding its own.
As of our February Northeast Supply and Demand Forecast, East Daley models a 3% average decline in 2023 in Northeast gross production vs 2022 (avg to avg), totaling 34.0 Bcf/d. – Alex Gafford Tickers: AR, EQT, RRC.
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