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Will Natural Gas Fall to $2? – Chesapeake Energy Corporation (CHK)

Exxon, on the other hand, reduced its natural gas production in the fourth quarter by 8.3% compared to the parallel quarter in 2011. The total natural gas production available for sale reached 12,541 mcfd in the fourth quarter. The drop in production was mainly in the U.S, Europe, and Asia.

According to Chevron Corporation (NYSE:CVX) recent quarterly reports, its total revenues in the fourth quarter declined by 3.1% and by 5.6% during 2012. For Chevron, the natural gas revenues account for a smaller fraction from its total revenues, as oppose to Chesapeake, therefore the drop in natural gas prices had a small adverse effect on its revenues than it had on Chesapeake. In any case, Chevron’s sales in natural gas in last quarter of 2012 fell by 6.1% and by 4% during the year.

If the price of natural gas will remain around the $3 to $3.5 range – a much lower price than the five year average – this could induce Exxon, Chesapeake and other leading oil and gas companies to cut their natural gas production.

Natural gas prices are likely to remain at their current low price range of $3-$3.5. The higher than normal storage levels and the expected rise in production from shale gas are likely to keep natural gas prices low. The current weather might raise the demand for natural gas, but unless the temperatures will drop precipitately the price of natural gas won’t rally to the high levels recorded before 2011.

Disclosure: The author holds no positions in stocks mentioned and does not plan to initiate positions within 120 hours of the posting of this article. This article is to be used for educational, research and informational purposes only and does not constitute investment advice. There are no guarantees, expressed or implied, of future positive returns in regards to the subject matter contained herein. Understand the risks inherent in investing before making the decision to invest or consult an investment professional for more information. Reasonable due diligence has been performed in regards to the information in this article. However, the author expressly disclaims any liability for accidental omissions of information or errors in fact.

The article Will Natural Gas Fall to $2? originally appeared on Fool.com and is written by Lior Cohen.

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