Southwestern Energy Company (SWN), Ultra Petroleum Corp. (UPL), EXCO Resources Inc (XCO): Can Natural Gas Companies Keep up With Growing Demand?

Page 1 of 2

With U.S. natural gas supplies still plentiful and relatively cheap, demand for the cleaner-burning fuel is expected to keep growing.

In addition to demand from utility companies, industrial and petrochemical manufacturers, and other energy-intensive firms, some have identified liquefied natural gas, or LNG, exports and natural gas vehicles, or NGVs, as the wildcards that could cause future demand to soar.

But would U.S. natural gas producers – most of whom have curtailed gas drilling as much as possible over the past couple of years – be able to keep up if a surge in demand were to materialize?

Southwestern Energy Company (NYSE:SWN)

Will gas producers be able to keep up?
The answer, according to Jim Tramuto, vice president of governmental and regulatory affairs for Southwestern Energy Company (NYSE:SWN), is a resounding yes. Speaking at the 2013 U.S. Energy Information Administration Energy Conference in Washington earlier this week, he expressed great confidence about the size of the U.S. shale gas resource base.

“Shale plays have gotten so much larger than anything we’ve seen over the past century,” Tramuto said. He assured the conference attendees about the industry’s ability to redeploy natural gas rigs to help bring supply and demand back into balance by saying:

Look at the number of rigs that are off the system. You have 246 horizontal [gas drilling] rigs. A year ago it was almost double that amount. Producers do have a way of regulating the choke, if you will, and either taking those rigs and putting them to work on the oil side, if you’ve got oil leases, or else we stack them.

Tramuto further pointed to efficiency gains across the industry as being the key for gas producers to keep pace with projected demand growth. “The resource base is there. [Producers] continue to get better and more efficient,” he said. Indeed, efficiency gains over the past couple of years have been quite impressive and, for some producers, downright remarkable.

Efficiency gains translate to reduced costs
For instance, Southwestern Energy Company (NYSE:SWN) slashed its average drilling time in the Fayetteville Shale to a little over five days per well, down from 17 days per well just a few years ago, while its drilling costs in the first quarter fell to about $2.2 million, down from $3.2 million a year earlier.

Similarly, Ultra Petroleum Corp. (NYSE:UPL), another energy producer heavily weighted toward natural gas, managed to drill 40% of its Pinedale field wells in less than 10 days, compared to just 3% in 2010, while reducing well costs in the field to $4.4 million in the first quarter, down 6% from $4.7 million as of year-end 2012.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!