The shale boom that sent natural-gas prices to a 10-year low is being felt for the first time in the oil markets.
Williams Partners LP (WPZ) joined Marathon Oil Corp. (MRO) and Devon Energy Corp. (DVN) yesterday in blaming a glut of propane and related products for lower profits in the second quarter. Spectra Energy Corp. (SE) and Apache Corp. (APA) followed suit today. Next week more companies are expected to show the effects of falling prices for so-called natural-gas liquids used in backyard barbecues and motor fuels as producer Chesapeake Energy Corp. (CHK) and Targa Resources Partners LP (NGLS), a pipeline and storage company whose trading symbol is NGLS, release earnings.
The “NGL bloodbath,” as it was dubbed by Tudor, Pickering, Holt & Co. last month, is rippling across the oil and gas industry as explorers cut production and reduce cash flow projections, service companies forecast lower demand for drilling rigs, and pipeline partnerships suffer falling revenue for their gas liquids processing plants. The price of an ethane- propane NGL mix was down 58 percent yesterday from a high in January, outpacing the 19 percent drop in crude from a February peak.
“The same thing is now happening to liquids that happened to natural gas itself,” said James Williams, an energy economist at WTRG Economics in London, Arkansas. “We now have too much. We have an oversupply, so it’s depressing the price.”
U.S. energy producers had counted on more lucrative oil and gas liquids to lift profits as the price of gas in New York tumbled earlier this year to an intraday low of $1.902 in April. As companies drilled for more liquids, the same oversupplies that gutted gas prices began to deflate NGLs....MORE