US natural gas production on steady downward path: analyst

Washington (Platts)--17May2004

US natural gas production "is heading firmly downwards" despite "massive"
increases in drilling activity, analyst Raymond James reported Monday.
Publicly-traded US exploration-and-production companies "are now showing a
4.2% [year-over-year] gas-production decline," Raymond James analyst Marshall
Adkins said. "As before, we see no significant near-term catalysts to alter
the declining supply picture, and therefore price rationing remains the only
viable option to bring the market into equilibrium." However, while the rate
of production decline appears to be accelerating, "we would caution that there
appears to be substantial volatility in these [year-over-year] numbers,"
Adkins said. Nevertheless, the analyst said that recent data from the US
Energy Information Administration, which indicated a year-over-year production
increase of about 0.6% for the entire industry in 2003, "seems to defy common
sense."

The major producers "continue to show the biggest decline" in gas production,
dropping 9.2% in first-quarter 2004 compared with a year earlier, the analyst
said. Production from independents actually grew 0.8% year-over-year, but
compared with Q4 2003, their production fell 0.1% in Q1 2004. Independent
producers appear to be driving "nearly all of the drilling activity increases,
with little production response to show for it," Adkins said.

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