Saturday, August 22, 2009

Sinking natural gas prices could fuel distressed sales

The post doesn't mention that some of the shale wells break even at $1.30 per mcf, which is why some analysts fear we could see $2.00 before enough wells are shut-in to affect supply.
Watch for more distressed asset sales in the oil patch -- or, should we say, the natural gas patch.

On the back of less demand and more production, natural gas prices slipped under $3 per thousand cubic feet on Thursday,, down from $13 last summer and their lowest close in seven years. That's obviously not good news for natural gas producers.

The break-even point for natural gas drilling, based on where you operate, is $4 to $5 per mcf, as it's more commonly known, so analysts expect more companies -- like XTO Energy Inc. (NYSE:TXO), Devon Energy Corp. (NYSE:DVN), Chesapeake Energy Corp. (NYSE:CHK), Anadarko Petroleum Corp. (NYSE:APC) and BP plc (NYSE:BP) -- to shut down their production as gas storage facilities become increasingly full.

"We believe these producers, among others, will be forced to shut-in production as storage facilities reject new supply given capacity constraints," energy investment bank Pritchard Capital Partners wrote in a report Friday morning....MORE