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Weak natural gas prices: what's happening?


Blog by Kevin Kurjata | December 11th, 2010


“DC Economic Action”
“Weak NG prices: what’s happening?”
Over recent weeks experts and commentators in Calgary have been weighing in on the flat NG prices and what the future might 
be for natural gas producers in Western Canada ….  
http://www.calgaryherald.com/business/Tertzakian+Natural+prices+likely+drop+further/3826836/story.html The next couple of 
years will be interesting as substantial new natural gas supply is developed by sophisticated technologies all across North 
America, likely driving prices down over the short-term.  Simultaneously, because of low prices, natural gas is gaining 
market share, from coal, in what is also a steadily growing demand for energy.
Some producers are cutting back; others are moving forward, some quite aggressively. The near-term will be challenging for 
some, lucrative for others.
Producers and key suppliers in our region continue to push forward. Why?  
the “Montney play” that is 1km beneath Dawson Creek and region is consistently touted by industry insiders as one of 
the lowest-cost-to-produce basins in North America. CalFrac and Trican executives confirmed this view to investment analysts 
in Miami at the Cannacord Genuity Global Energy Conference on November 30, 2010.  
http://www.wsw.com/webcast/canaccord3/tcw.to/ 
medium to long-term NG pricing looks to firm to the $4 – 5 range; at these levels the most efficient producers in 
North America will generate decent returns for shareholders;  
much of the infrastructure in the region has been paid for within the first 1 to 1.5 years of production; continued 
production results in strong cash-flows, even at low prices;
liquids-rich natural gas is produced in our region, improving well economics.
Significant, sustainable activity continues in our region. More on that next blog! 
Over recent weeks experts and commentators in Calgary have been weighing in on the flat NG prices and what the impact might be for natural gas producers in Western Canada ….  

The next couple of years will be interesting as substantial new natural gas supply is developed by innovative technologies all across North America, likely driving prices down over the short-term. Simultaneously, precisely because of low prices, natural gas is gaining market share, from coal in particular, in what is a steadily growing demand for energy in North America.

Some producers are cutting back; others are moving forward, some quite aggressively. The near-term will be challenging for some, lucrative for others.

Producers and key suppliers in our region continue to push forward. Why?

  • the “Montney play” that is 1km beneath Dawson Creek is consistently indicated by industry insiders to be one of the lowest cost-to-produce basins in North America. CalFrac and Trican executives recently confirmed this view to investment analysts in Miami at the Cannacord Genuity Global Energy Conference on November 30, 2010. 
    •  in 2011, these same suppliers see continuing strong activity in the South Peace region,  while they see a  50% reduction in Horn River well completion activity (north of Fort  Nelson) due to the current low pricing for natural gas. 
  • medium to long-term NG pricing looks to firm to the $4 – 5 range; at these levels the most efficient producers in North America will generate decent returns for shareholders;
  • much of the infrastructure in the region has been paid for within the first 1 to 1.5 years of production; continued production results in strong cash-flows, even at low prices;
  • liquids-rich natural gas is produced in our region, improving well economics.

Significant South Peace Action continues in our region: that translates to jobs and steady real estate values in Dawson Creek.