Major U.S. Natural Gas Producers Prepare for Production Cuts

By Georgina McCartney and Scott DiSavino

HOUSTON/NEW YORK (Reuters) – Major U.S. natural gas producers are preparing to further curtail production in the second half of 2024, after prices sank nearly 40% over the past two months.

Henry Hub gas futures have dropped to around $2 per million British thermal units (mmBtu), while in West Texas, Waha prices have turned negative a record number of times so far in 2024. Prices fell as demand softened following cooler than expected temperatures. Supplies expanded as some producers lifted production during the second quarter after prices climbed approximately 47% in April and May.

EQT, one of the top gas producers in the U.S., has embedded around 90 billion cubic feet equivalent of strategic curtailments this fall, which the company will implement if the market remains depressed, CFO Jeremy Knop said during the company’s second-quarter earnings call.

Houston, Texas-based Apache is also set to curtail an additional 90 million cubic feet per day (mmcfd) of gas in the third quarter, its CFO, Stephen J. Riney told analysts in an investors call last week. Apache curtailed 78 mmcfd of gas production in the second quarter due to pricing extremes in the Permian Basin, the company noted in its Q2 earnings report.

Chesapeake Energy, which will become the largest U.S. gas producer following its merger with Southwestern Energy, plans to defer some well completions while the gas market remains weak. This strategy aims to prepare for a future correction of supply and demand imbalances, as stated in the company’s Q2 earnings report.

Rivals Antero Resources Corp and EGO Resources are adopting similar measures, as outlined in their earnings reports. Chesapeake’s decision to postpone well completions is logical, according to Robert Wilson, vice president of analytics at East Daley, as it anticipates an increase in LNG demand that could support prices.

Shale producer Coterra Energy reversed some curtailments at the end of the second quarter but is bracing for additional reductions. “We are prepared to make further cuts as some of our summer sales commitments roll off in the shoulder season,” said Blake Sirgo, senior vice president of operations for Coterra during the company’s Q2 earnings.

The Energy Information Administration (EIA) stated that U.S. natural gas output will average about 103.3 billion cubic feet per day (bcfd) this year, compared to 103.8 bcfd produced last year, and this is a slight downgrade from the previous forecast of 103.5 bcfd in July’s report.