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.