Natural Gas Weekly: September 26, 2024
Rigs – While gas markets for now seem stuck at the $2/MMBtu price level, some operators are preparing for better days ahead. Rig counts have been quietly rising in the gas-focused ArkLaTex (Haynesville) and Anadarko basins, a possible sign of a turnaround that East Daley Analytics anticipates this winter and into 2025.
Rig counts in the Anadarko and ArkLaTex peaked early in 2024 and then declined as gas prices fell this year. Markets entered 2024 well above $3/MMBtu before a mild winter and oversupply sent Henry Hub to the $1.50-1.60 level in March and April ‘24.
Operators in the Haynesville reacted quickly to the bearish price trend, with rigs in Louisiana and East Texas peaking in January at an average count of 57 and then falling in lockstep with gas prices. Operators in the Anadarko were slower to react as rig counts fell from a high of 62 in April to a low of 52 in July ‘24.
Rig counts in the Haynesville and Anadarko both bottomed in July, decreasing by 20% and 16% on the year. However, producers have started to increase activity since then, adding 4 rigs in each basin through mid-September (see figure).
Higher prices in the 2024-25 winter strip likely explain the recent rig gains. Henry Hub futures steadily climb to a high of $3.39/MMBtu in January 2025 in recent trading activity. If producers are hedged, they can drill wells now and have time to complete them and start production by the winter.
In Energy Data Studio, users can track weekly rig counts in every basin by operator and by G&P system, based on EDA’s patented rig allocation model. In the Anadarko Basin, small independents Citation Oil & Gas and Validus Energy have added rigs recently. So have larger independents Mewbourne and Camino Natural Resources, each adding 1 rig since July. In Energy Data Studio, we allocate these new rigs to Targa Resources’ (TRGP) South OK, ONEOK’s (OKE) Anadarko, Energy Transfer’s (ET) Enable, and the EnLink Midstream (ENLC) COK system.
Similarly in the ArkLaTex, a mix of independents and larger operators have shown new interest. Sabine Oil & Gas, Sponte Operating, Trinity Operating, and BPX Energy have each added 1 rig since July. East Daley allocates the new rigs to ET - East Texas, ET - Louisiana, and Kinder Morgan’s (KMI) KinderHawk system, respectively.
If this trend continues, ArkLaTex and Anadarko G&P systems could expect to see an uplift in volumes in early 2025 as prices recover and new demand opens from more Gulf Coast LNG exports.
Infrastructure – Natural Gas Pipeline of America (NGPL) has called a force majeure on a section of the pipeline in Texas that is curtailing deliveries into Louisiana, causing Henry Hub prices to jump earlier this week.
On Monday (September 23), NGPL told shippers it had found anomalies near Compressor Station 302 in southeastern Texas requiring immediate repair. NGPL said it will reduce maximum operating capacity eastbound from the station by ~35% of contracted monthly quantities.
NGPL flows into Louisiana fell by 300 MMcf/d on Tuesday. Henry Hub cash prices jumped over $0.30 Friday to Monday.
The total capacity east through Station 302 is ~1.2 Bcf/d, while scheduled quantities are ~1.13 Bcf/d. Therefore, we expect ~400 MMcf/d of capacity to remain offline until further notice.
Owned by Kinder Morgan (KMI), NGPL has been conducting ongoing maintenance on the line for most of the summer, and full capacity was only available for about two weeks in early August. However, one of NGPL’s major customers, Sabine Pass LNG, tends to produce less LNG in the hot summer season, so the diminished capacity has been offset by an almost equal reduction in demand.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a 54 Bcf injection into working gas for the week ending September 20. The surplus to the 5-year average would decrease by 34 Bcf to 240 Bcf while the surplus to last year would fall by 9 Bcf to 166 Bcf.
The latest week includes both supply and demand impacts from Hurricane Francine. Offshore gas production in the Gulf of Mexico fell by ~1 Bcf/d but we expect demand fell even more , mainly from delayed loadings at LNG export docks and lower power generation in the Southeast region.
As the storage injection season draws to a close, East Daley projects another 452 Bcf will be injected through the end of October in the latest monthly Macro Supply & Demand Forecast, taking inventory to 3,897 Bcf by the end of October. This equates to an average 70 Bcf/week injection over the next eight weeks, which would be very close to the 5-year average injection rate.
Rigs – The US rig count decreased by 4 for the September 14 week, standing at 565. Basins losing rigs include the Anadarko (-3), Bakken (-3), Denver Julesburg (-1) and Uinta (-1). The large W-o-W drop in the Anadarko and Bakken is most likely due to rig movements and should recover next week. The ArkLaTex and Eagle Ford each added 1 rig on the week.
On the midstream side, Kinder Morgan (KIM) is down 4 rigs total on its Eagle Ford, Uinta and Bakken systems. ONEOK (OKE) is down 2 rigs total with losses on its Anadarko system.
East Daley’s weekly Midstream Activity Tracker monitors rig activity by basin and by gathering and processing (G&P) system to better understand midstream impacts. We allocate rigs and monitor flows through 150+ public and privately owned G&P systems in every North American basin. Reach out for more information on the Midstream Activity Tracker.
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