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Natural Gas: A Long-Time In The Making

October 9, 2020

Welcome to the long-time making edition of Natural Gas Daily!

Natural gas producers have gone through a much tougher period than oil producers. First, natural gas prices fell from $7/MMBtu average in the pre-2008 era, then prices averaged $3.50+/MMBtu between 2010 and 2014, and now, recently, where prices averaged sub $2/MMBtu for the first 6 months of 2020.

So, is it hard to believe that no one thinks an incoming supply led deficit will be sustained?

But as we wrote in an article a month ago titled, “Natural Gas Market Deficit Over Winter May Exceed 5 Bcf/D This Coming Cold Season.” Irrespective of the weather outlook over the winter, the bear case still has natural gas storage falling to the 5-year average due to the incoming supply deficit.

And it’s easy to understand why this is the case. Consider the following chart illustration:

Source: EIA, HFI Research Estimate

As you

Natural Gas Could Rise Fast, and One Producer is Poised to Gain

October 9, 2020

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Southwestern Energy Co., natural gas production site

Julia Schmalz/Bloomberg

Natural gas prices could rocket higher this winter, and some producers could emerge from hibernation in much stronger shape.

Morgan Stanley analyst Mark Carlucci thinks

EQT

(EQT), the largest gas producer in the U.S., can do particularly well under those circumstances and he upgraded the shares to Overweight from Equal Weight in a note on Friday.

Southwestern Energy

(SWN), another gas producer, is also improving, and Carlucci upgraded its shares to Equal Weight from Underweight.

Natural gas prices have been depressed for years because there’s simply too much of it. Natural gas is a byproduct of oil production, and a boom in oil drilling in the U.S. has also led to an increase in natural gas supplies. But oil drilling has declined amid the pandemic and is likely in for a longer slump given depressed prices. So natural gas

Strike Could Cut a Quarter of Norway’s Oil and Gas Output Next Week | Investing News

October 8, 2020

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OSLO (Reuters) – An oil workers strike in Norway could cut output by almost a quarter next week, operators said on Thursday, though the union behind the industrial action in western Europe’s biggest crude and gas producer said a resolution was possible.

In total, 966,000 barrels of oil equivalent per day were expected to go offline by Oct. 14, the Norwegian Oil and Gas Association (NOG) said, triple the level of outages so far due to the strike over pay and conditions.

The strike has helped lift benchmark Brent crude

above $43 a barrel this week and the prospect of more shutdowns was one of the factors behind a 2.6% jump on oil prices on Thursday, as well as higher gas prices.

Crude oil and natural gas liquids will account for about 70% of the planned cuts with natural gas making up almost 30%, a Reuters calculation based on Norwegian

Why These Oil and Gas Companies Got Clobbered in September

October 8, 2020

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What happened

Shares of top oil and gas companies Parsley Energy (NYSE: PE), Kinder Morgan (NYSE: KMI), and Phillips 66 (NYSE: PSX) tumbled more than 10% in September, according to data provided by S&P Global Market Intelligence. That was much worse than the S&P 500, which only slipped 3.9% during the month.

Reflecting broad underperformance across the industry, shares of Permian Basin driller Parsley Energy plunged 12.9% during the month, while big natural gas pipeline operator Kinder Morgan’s shares fell 10.8%, and refiner and gas station operator Phillips 66 saw its shares drop 11.3%. For the year, shares of all three companies are down between 40.5% (Kinder Morgan) and 53.4% (Phillips 66).

Image source: Getty Images.

So what

The oil industry has had a lot to contend with in 2020. While September didn’t see the massive swings in oil and gas prices that rocked the sector earlier

Foreign-Backed Consortium in Talks for Petrobras Gas Fields in Brazil, Sources Say | Investing News

October 8, 2020

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By Gram Slattery and Carolina Mandl

RIO DE JANEIRO/SAO PAULO (Reuters) – A consortium of Brazil’s 3R Petroleum and Norway-linked DBO Energy is in bilateral talks with Brazil’s Petrobras to purchase a cluster of offshore natural gas fields, according to two sources with direct knowledge of the matter.

The Peroa cluster, located off the coast of Espirito Santo state, would be among the first all-gas offshore fields sold by Petrobras amid a larger push to break the company’s near-monopoly in Brazil’s natural gas value chain.

Petroleo Brasileiro SA , as the state-controlled firm is formally known, has long dominated most segments of the Brazilian natural gas sector. But in recent years, it has begun selling off pipelines and assets in transport and distribution, in a move the company and the government hope will spur competition.

Several international firms already produce significant amounts of natural gas in Brazil, as they operate

BHP Group to Bump Up Stake in Shenzi Oil and Gas Field to 72%

October 7, 2020

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BHP Group BHP recently announced the signing of an agreement with Hess Corporation to acquire the latter’s 28% interest in Shenzi oil and gas field located in the Gulf of Mexico for $505 million. This move is in sync with the company’s plans to augment its petroleum portfolio through targeted acquisitions in high-quality deepwater assets and the continued de-risking of growth options.

Currently, Shenzi is structured as a joint ownership with BHP being the operator with a 44% interest, Hess holding 28% and Spain’s Repsol S.A. the remaining 28%. Following the completion of the deal, expected by the end of December, BHP Group’s stake will go up to 72% and add approximately 11,000 barrels of oil equivalent per day to production (90% oil).

The Shenzi facility is located approximately 120 miles (195 kilometres) off the Louisiana coastline and is installed in approximately 4,300 feet (1,300 metres) of water on Green

Caterpillar (CAT) Inks Deal to Buy Weir Oil & Gas for $405M

October 6, 2020

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Caterpillar Inc. CAT has entered into an agreement with Weir Group PLC to acquire its Oil & Gas business for a cash price of $405 million. The buyout will expand Caterpillar’s offerings in the oil & gas market. Notably, the acquisition includes more than 40 Weir Oil & Gas manufacturing and services locations, and nearly 2,000 employees.

Based in Scotland, Weir Group is a global engineering company. Its Oil & Gas Division produces pumps, consumable parts, flow iron, wellhead and pressure control products. It provides pressure pumping, pressure control and after-market services to upstream oil and gas customers in North America and worldwide. This February, Weir Group announced its intention to divest the Oil & Gas division in line with its focus to become a mining technology pure play. Together, Weir Oil & Gas’ pressure pumping and pressure control portfolio and Caterpillar’s engines and transmissions will enable the latter to

Wild gas price swings reveal doubts about winter, supplies

October 5, 2020

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Rollercoaster moves in the natural gas market over the past few weeks are underscoring traders’ uncertainty about whether a frigid winter, muted output, and rebounding demand will send prices rocketing higher in the coming months.

Gas futures settled more than 7 percent higher on Monday, mimicking gains in oil and equities. But just two weeks ago, prices posted their biggest one-day loss in almost two years. Historical volatility has surged to levels not seen since late 2018, and implied volatility, a measure of how dramatic price swings may be going forward, is the highest in data going back to 2010.

Bullish bets on US gas have soared as traders wager on lackluster production and surging demand heading into winter. Liquefied natural gas exports are rising as consumption recovers from pandemic-driven lockdowns, and as terminals restart after storm-related outages and maintenance. Meanwhile, shale output remains subdued as drillers heed investor calls

Weir Group to sell oil & gas division to Caterpillar for $405 million

October 5, 2020

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Adds details on the deal

Oct 5 (Reuters) – Weir Group Plc WEIR.L said on Monday it had agreed to sell its oil and gas division to U.S. heavy equipment maker Caterpillar Inc CAT.N for $405 million in cash, as the engineering company focuses on its mining business.

The deal, which follows a collapse in global oil prices and a swathe of sectoral bankruptcies, will have a $70 million U.S. cash tax benefit for Weir, and the net proceeds from the deal will reduce the group’s leverage, the company said.

The transaction includes Weir’s North American and international oil and gas operations, comprising its Pressure Pumping and Pressure Control business units, and associated after-market spares among other things.

Weir Group Chief Executive Officer Jon Stanton called the move a major milestone in transforming the group into a focused, premium mining technology business.

The company said the deal, which

Caterpillar Signs Agreement to Acquire Weir Oil & Gas

October 5, 2020

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DEERFIELD, Ill., Oct. 5, 2020 /PRNewswire/ — Caterpillar Inc. (NYSE: CAT) has signed an agreement to acquire the Oil & Gas Division (“Weir Oil & Gas“) of the Weir Group PLC, a Scotland-based global engineering business. Headquartered near Fort Worth, Texas, Weir Oil & Gas produces a full line of pumps, flow iron, consumable parts, wellhead and pressure control products that are serviced via an extensive global network of service centers located near customer operations.

“Combining Weir Oil & Gas’s established pressure pumping and pressure control portfolio with Cat’s engines and transmissions enables us to create additional value for customers,” said Joe Creed, Vice President of Caterpillar’s Oil & Gas and Marine Division. “This acquisition will expand our offerings to one of the broadest product lines in the well service industry.”

The purchase price of $405 million is to be paid in cash at

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Southwestern Energy Co., natural gas production site

What happened

So what