This is the reason we started getting bullish last month. Rather than go into the intricacies of the decline in drilling offset by the completion of the (possibly as many as) 1300 wells that were drilled but not hooked up last year added to the gas produced from oil wells and, well.....here's RigZone:
This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.
The Energy Information Administration's (EIA) survey of natural gas
production from the Lower 48 states for the month of December 2012
showed the first decline in output since March of that year. With the
continued decline in drilling rigs targeting natural gas formations,
analysts are encouraged that possibly we are witnessing the first
results of the drilling slowdown. The EIA's commentary associated with
the release of the data, however, mentioned weather related factors
impacting gas output, especially in the associated gas production from
the Bakken where an early and severe winter caused a drilling and well
completion slowdown. Additionally, many producers ran out of budget
money before the end of the year and were forced to slow activity. If
nothing else, however, the slowdown in gas output reinforces the
phenomenon the industry may soon be confronting, which is the need to
ramp up drilling activity to offset the steep decline in existing well
production due to the nature of shale gas wells.
Overall, the initial estimate of gross natural gas production for the
entire United States fell just about 1 billion cubic feet (Bcf) in
December. Alaskan gas production actually rose about 0.2 Bcf while
output in the Gulf of Mexico fell almost as much (-0.14 Bcf), meaning
that virtually the entirety of the production decline occurred in Lower
48 basins. If we examine the revision to the prior monthly's initial
production estimate, there was a reduction of 0.32 Bcf, which suggests
the December production decline may only have been about 0.7 Bcf, but of
sufficient size to be meaningful. Before analysts get too excited about
this potential change in trend and what it might mean for natural gas
prices, a new report from natural gas research firm, Bentek Energy,
suggests that 2013 and 2014 will be a replay of the past several years –
growth in production rather than a decline. The firm's forecast,
however, calls for a slowing in the rate of increase in gas production
during the next two years compared to the rate of growth experienced in
the prior two years.
According to Bentek, natural gas production in the U.S. rose 3.6%, or
by 1.6 Bcf per day in 2010 and increased by an average of 3.5
Bcf/d in 2011-2012. They are projecting that overall gas output will
grow by 2 Bcf/d in 2013, as nine key shale basins will grow by 4.9
Bcf/d, which will be offset by other production falling by 2.9 Bcf/d. In
2014, the firm sees production increasing by 3.4 Bcf/d. An interesting
point in the historical data is that in 2011 offshore gas output fell by
1.2 Bcf/d and then by another 0.9 Bcf/d in 2012. Bentek sees offshore
production declining by only about 0.3 Bcf/d in 2013 and reaching steady
output in 2014. If we were to exclude the impact of the decline in
offshore production in 2011-12, the average annual output increase was
about 4.3 Bcf/d, or nearly 0.8 Bcf/d more coming from onshore basins. By
the end of 2014, Bentek foresees gas output above 70 Bcf/d, up from
current production of slightly be low 65 Bcf/d....MORE
