State of the 2019 Natural Gas Market 1 First Half 2019 Recap The natural gas price has declined 37% year-to-date driven primarily by record injections in May. Above normal injections were the result of: o Maintenance at LNG…
Key Macro Takeaways Strong demand fundamentals combined with the sheer magnitude of the base supply decline are underappreciated by the market 1 U.S. Natural Gas Demand to Remain Strong in 2019+, Led by Exports - Total U.S. demand…
U.S. Gas Supply and Base Decline Significant U.S. base decline requires substantial new supply just to maintain flat production 100 Maintenance Production Level YE 2018(1): Base Decline 85.7 Bcf/d 90 % Contribution to Current…
U.S. Gas Supply and New Supply Wedge Material demand growth through 2023 requires even more new supply YE 2023E: 98.3 Bcf/d 100 YE 2018(1): Current: 85.7 Bcf/d 87.1 Bcf/d Marketed Dry Gas Production Forecast Rest of US(3) 90 Base…
U.S. Gas Supply Growth Forecast Almost all U.S. gas supply growth over the next 5 years is expected YE 2023E: to come from the Appalachian and Permian Basins 98.3 Bcf/d 100 YE 2018(1) : Current: Marketed Dry Gas Production Forecast…
New Gas Supply Breakdown 47% of new gas supply needed in the 2019-2023 period is forecast to come from plays with breakeven gas prices that are higher than the long-term 2020-2023 strip 2.56/MMBtu New Supply Contribution by Basin…
Associated Gas Breakdown 34% of new gas supply needed in the 2019-2023 period is forecast to come from rich gas plays, 14% of that new supply is Appalachian Rich gas. Associated gas from oil plays is 20% of total new supply. Rich vs.…
Dry Gas Basin Breakeven Analysis Most of the dry gas plays in the U.S. have breakeven prices above the current 2020-2023 strip at 2.56/MMBtu - Dry gas producers will require higher realized prices than the current strip to incentivize…
Permian Gas Supply Growth While Permian associated gas is expected to be a key contributor to U.S. gas supply growth, the Permian is not expected to dominate the 86 Bcf/d U.S. dry gas supply market which faces a 23% base decline in…
Closer Look Into Permian Pricing Permian Production is down 0.8 Bcf/d from the end of 2018, due primarily to negative pricing at the Waha hub, caused by maxed out pipeline capacity Rig counts are down, suggesting moderated growth for…
Appalachian Gas Supply Growth Appalachian production including the Marcellus and Utica Shales, contributes 36% of U.S. natural gas supply today and is expected to grow to 37% by 2023, or 35.9 Bcf/d - 31.6 Bcf/d of current production…
U.S. Natural Gas Demand Forecast Total U.S. natural gas demand is expected to grow by 11.6 Bcf/d, or 13% from 2019 2023 absorbing U.S. production growth 2019-2023 Growth % Other: 0% of demand(2) 0% 100 U.S. Dry Marketed Gas…
Near Term Natural Gas Fundamentals Power Burn Average monthly power burn increased 0.9 Bcf/d from 2018 to 2019 year to date, despite negative heating/cooling degree day comparisons, and is 19% above the five year average U.S.…
Historic Summer Weather Look Despite the cooler than normal summer, power burn and demand are average to above average Only the past three weeks have shown weather below the 5 year range Weather has less of an effect on natural Gas…
Exports Drive Demand Growth 11 Bcf/d expected increase in U.S. natural LNG projects under construction and exports gas exports from 2018-2023 to Mexico will drive U.S. demand U.S. Natural Gas Exports (Bcf/d) 20 THE U.S. IS A NET…
2019 is a Big Year for LNG Capacity Buildout Of the 9.3 Bcf/d LNG export capacity additions under construction, 4.6 Bcf/d (43%) are expected to come online in 2019 A number of 2nd wave LNG projects seeking FID in 2019 could add +7.9…
Growing LNG Market 3.9 Bcf/d of LNG capacity growth expected AR is a top U.S. LNG supplier with in 2019 with multiple 2nd wave commitments expected to reach projects seeking FID 700 MMcf/d by YE 2019 U.S. LNG Export Capacity…
Strong Near-Term Natural Gas Fundamentals Current 2,390 Bcf storage level is 6% below 2019 end of injection is currently trading 5-year average despite 6.2 Bcf/d year over at 3,623 Bcf which is only 2% year production growth below the…
Storage Fundamentals Build/Draw 2019 After a strong start to injections this season (four weeks outside of 5 year range), weekly injections have moderated and are close to the 5-year average, within the next three weeks, weekly…
Monthly Dry Gas Production Trend In order to fill storage to the projected level of 3.6 Tcf, production will need to outpace the expected forecast for the next four months The recent decline in the natural gas strip could lead to…
Monthly Dry Gas Production Trend There has been minimal supply growth from Appalachia and in the U.S. as a whole year-to- date as new gas supply has only slightly offset base decline 100 U.S. Total 90 Appalachia 84.9 86.1 86.2 85.7…
D&C Capital Reductions Appalachian peers announced an average 21% reduction in their 2019 drilling and completion capital spending relative to 2018 levels, moderating supply growth expectations Appalachian Peer D&C Capital Guidance…
Results in Moderated Supply Growth The top Appalachia producers(1) made up 57% of total Appalachia(2) dry gas production in 2018 Those top producers are expected to slow annual growth from 18% in 2018 to 6% in 2019 Annual Dry Gas…
Summary Strong Demand Growth and Challenges to New Supply Are Underappreciated by the Market Exports Lead Strong U.S. Natural Gas Demand Growth Through 2023 LNG Exports Expected to Double in 2019 to 6.2 Bcf/d; Doubling again by…
Appendix
U.S. Coal to Gas Switching: Momentum Continues Since 2015, natural gas has been the more economic fuel source, a trend that is expected to continue The gap between natural gas and coal electricity generation is expected to continue…
Base Decline Calculations U.S. Overall Decline Rate Detail Time Average (Bcf/d) Year-Over-Year Decline Rate (%) Q4 2018 85.28 - Q4 2019 62.42 (27%) Q4 2020 51.38 (18%) Q4 2021 44.65 (13%) Q4 2022 39.95 (11%) Q4 2023 36.37 (9%)…
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