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In contrast to The STEO And NGM

On Tuesday of this week the Energy Info Administration launched its latest Drilling Productiveness Report, projecting declines in US natural gas production volumes. Meanwhile, daily pipeline flow data reveals fuel manufacturing hitting file highs and fuel storage fill could also be heading toward most ranges. The CME/NYMEX Henry Hub natural gas price for the November 2015 is responding to those burgeoning supplies, settling yesterday at $2.518/MMBtu, close to all-time lows for this time of 12 months. Right this moment we proceed our look at the various sources of natural gas production knowledge and what they inform us.

Bending machine

In the first a part of “Sooner or Later,” we checked out the natural gas production information in EIA’s historic monthly report – the Natural Gas Month-to-month (NGM) – as well as two of its forward-trying monthly stories – the Short-Term Vitality Outlook (STEO) and the Drilling Productivity Report (DPR). The September ending NGM printed actual fuel production volumes for July 2015 for the first time and showed that gasoline production rose to a document excessive in July, exceeding June manufacturing and in addition trumping prior expectations for July in the STEO and DPR knowledge, each of which last month had predicted that July 2015 volumes would decline month-on-month. What’s more, the September 2015 STEO additionally raised its projections for August by way of December 2015 by about 100 MMcf/d.

The latest DPR launched earlier this week (Oct. Thirteen) revised its July 2015 gasoline production estimates up by a total of about four hundred MMcf/d across all seven shale basins, and, additional, it lifted its projections for August via October 2015 as nicely. Upward revisions have been largest within the Utica and what is natural gas vs oil Permian basins. In contrast to the STEO and NGM, nonetheless, the most recent DPR continues to foretell that the mixed volumes from all basins declined between June and July and will proceed to decline month-over-month by means of not less than November.

We explained final time that while the assorted EIA datasets are usually reliable for the historical durations, it isn’t unusual for the forecast periods to be revision-prone and underestimate development in this setting where producers are quickly adapting to decrease market prices. In this case, standard mannequin assumptions primarily based on historic metrics, even recent historical past, grow to be less accurate for predicting future production volumes. As we touched on last time, this is because of changes in producer productivity, including improved completion strategies and a give attention to high-yield wells in “sweet spots” or increasing nicely completion charges, all of which could cause production to extend whilst rig counts remain down. In effect this will increase how a lot gasoline is produced per rig for brand spanking new wells, an important metric if you’re trying to answer the query of whether manufacturing from new drilling is sufficient to offset what is natural gas vs oil current wells’ natural decline rates. This measure is a key feature of the DPR, which gives historical “production per rig” for new wells and initiatives it forward for the three months after the last month of actuals revealed in the NGM. Because productiveness is constantly changing, however, the forecast is subject to historic bias. But its “production per rig” metric does present worthwhile market intelligence about the trajectory of effectivity rates by shale basin, as proven in Figure 1.

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