US shale companies ramp up natural gas production as prices rise

US shale companies ramp up natural gas production as prices rise

HOUSTON / NEW YORK (Reuters) - Higher natural gas futures prices in 2021 and continued gains in oil reserves are pushing US shale companies to drill and produce more gas.

Producers increase spending on natural gas on the back of forecasts of a 45% rise in gas prices next year, compared with a forecast of a 15% rise in Brent prices.

America's largest shale oil producer, EOG Resources (NYSE: EOG), announced this month that it will begin gas sales next year from 15 new wells in its recently discovered 21 trillion cubic feet of gas..

Continental Resources recently switched its drilling rigs from oil to gas in Oklahoma. Apache Corp (NASDAQ: APA) said it plans to complete three wells in Texas this month following a 15% increase in U.S. gas production in the third quarter compared to the second quarter and 6% year-on-year..

"The demand remains quite strong. The proposal needed capital", - said Christopher Kalnin of Banpu Kalnin Ventures.

The number of US rigs for gas production - an indication of future production - has jumped 13% to 77 since July. About a quarter of all operating US rigs are producing gas, up from 16% last year, according to service firm Baker Hughes..

The Haynesville gas field, which stretches across Louisiana and Texas, has seen a 25% increase in production since July. Installations are also up 8% at Marcellus, the largest US gas field.

THE HIGHEST PRICES IN TWO YEARS

Gas prices could jump 45% to an average of $ 2.94 per million British thermal units (BTU) in 2021 from $ 2.03 this year, analysts predict. This will be the highest annual average since 2018. Gas prices could reach $ 3.50 per million BTU in the summer of 2021, Bank of America (NYSE: BAC) expects. For comparison, on Friday, November 27, quotes were $ 2.84 per million BTU.

Since March, producers have doubled their natural gas hedges, blocking prices for future products. They are hedging 53% of their gas volumes next year, up from 43% of their oil, according to finance firm Raymond James..

Natural gas "not so badly affected by the COVID-19 pandemic", said Bernadette Johnson of Enverus. "For those with some variety in their assets, this could help weather the storm".

(Jennifer Hillier in Houston and Scott DiSavino in New York, translated by Olga Devyatiarova. Editor Anna Kozlova)