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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
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 World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!