The Daley Note: January 9, 2023
It’s no secret East Daley is bullish on natural gas production heading into 2023 – and therefore bearish gas prices, with the Permian Basin leading the charge. Our Permian exit-to-exit growth rate of 1.8 Bcf/d is predicated on very tight egress over the next 18 months getting relief from desperately needed additional gas takeaway capacity.
It's a delicate balance, and we talk about this in detail in our annual outlook of the energy sector in 2023 Dirty Little Secrets. As shown in the table below, we could see up to 1.8 Bcf/d of additional gas pipeline capacity from now until year-end 2023.
East Daley's Natural Gas Weekly is a weekly update to our monthly US Macro Supply and Demand Forecast covering rigs, flows, production, prices, and capacity constraints that materially change our view on supply and demand. This update highlights what investors and traders need to monitor in natural gas to ensure they are on the right side of the market. Sign up to subscribe to the Natural Gas Weekly.
Kinder Morgan (KMI) is repairing Line 2000 on the El Paso system, which is due to boost effective takeaway to the Southwest in the spring by ~0.7 Bcf/d. The Whistler and Permian Highway pipelines are also due to add compression in 4Q23, increasing Permian egress to the Gulf Coast by a combined 1.1 Bcf/d.
While most producers are tempering growth in the name of capital discipline and free cash flow generation, other producers are showing no slowdown in activity. At the end of 2022 there were still almost 350 active rigs in the Permian Basin, about 15 rigs higher than we forecast for January 2023. Producers like Exxon (XOM), Chevron (CVX) and Permian Resources have guided to 5-15% annual growth in production.
So long as these planned pipeline projects can stay on schedule, we see expanding room for Permian supply to grow in the back half of 2023. — Rob Wilson, CFA Tickers: CVX, KMI, XOM.
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East Daley Analytics' Natural Gas Watch provides an update to our monthly US Macro Supply and Demand Forecast. The update covers rigs, flows, production, prices, and capacity constraints that materially change our view on supply and demand. This update highlights what investors and traders need to monitor in natural gas to ensure they are on the right side of the market. Subscribe to Natural Gas Weekly.
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The Russia-Ukraine conflict has pushed commodity prices higher and spurred greater global demand for US energy products. Meanwhile, more disciplined growth from the upstream has infrastructure finally filling up across commodities. Will exports power the next infrastructure boom?
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