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The long-term natural gas & oil production forecast model is based on public producer forecast guidance and comparing the YOY (year-on-year) percent changes from the guidance forecast to actual production from a year ago. The YOY percent changes are also adjusted for YOY private versus public fracking activity differentials if the difference is significant. After adjusting for private versus public fracking differentials, the YOY percent changes are added onto actualized state and DOE dry gas production data from a year ago to come up with dry gas production forecasts. This is done for the Lower 48 and all the subregions. The long-term production forecast model is updated quarterly to coincide with producer quarterly earnings.
Lower 48 US NG
The long-term production forecast for 2024 was revised slightly higher by 0.1% or about 100 MMcf/d compared to the prior reporting period. Lower 48 NG production is expected to be lower by 0.8% YOY for 2024. The upward revision is coming from West Texas where well outperformance by producers and efficiency gains have been the strongest in the Lower 48. Production is expected to decrease in September 2024, as it is a high pipeline maintenance month with weak next day cash pricing. October 2024 through December 2024 should see a strong recovery in production due to much higher natural gas pricing, higher fracing activity, Matterhorn Pipeline commencing full operations, and the expectation that the ~2.3 Bcf/d of deferred TILs (DTILs) will be brought to production mostly in the Northeast.
US Oil
The long-term oil production forecast is revised higher from the prior reporting quarter by 0.15% due to continued well outperformance by producers and stronger than expected efficiency gains. US oil production is expected to be up 2.15% YOY in 2024. Producers continue to have success with simufracing, trimulfracing, and U-turn or horseshoe wells. US oil production is expected to be flat until around the end of Q3 2024 when production should launch back to new all-time highs in Q4 2024. This is consistent from what Chevron has been saying about loading their Permian production growth towards the end of 2024. The recent drop in crude oil prices bears watching and could affect the long-term oil production forecast for 2025 and beyond if oil prices go down to the mid 50’s.
Haynesville NG
Once again it is still a tale of two Haynesville in 2024. Haynesville TX natural gas production is expected to be up YOY in 2024 and is revised higher from the prior reporting period. Comstock continues to have significant well discoveries and the company plans aggressive expansions well into 2027. Haynesville LA natural gas production will be down 10.5% YOY in 2024 and is revised lower from the prior reporting period. Chesapeake Energy said their natural gas production should bottom out sometime in Q4 2024.
West Texas NG
West Texas natural gas production for 2024 is revised higher by 2.4% from the prior reporting quarter due to production and well outperformance. Matador Resources is having continued success with trimulfracing. Trimulfracing yields a 50% reduction in completion time. Diamondback Energy is also looking to begin trimulfracing operations. Devon Energy’s higher production volume expectations are due to its better than expected well performance. Matterhorn Express Pipeline should increase West Texas natural gas production in Q4 2024.
West Texas Oil
2024 West TX oil production is expected to be higher YOY by 4.91% and the forecast is revised upward from the prior reporting quarter by 0.11%. EOG Resources expects to grow oil volumes in 2024. However, the company doesn’t expect as much oil production growth in 2025. Ovintiv still expects to trimulfrac 50% of their new wells in 2024 compared to 25% of their new wells in 2023.
South Texas NG
2024 natural gas production in South Texas is expected to be flat YOY and has been revised downward by 2.5% from the prior reporting quarter. Producers like SilverBow are still shifting resources from NG wells to oil wells in 2024 due to low natural gas prices. Matterhorn Express Pipeline should cause South Texas NG production to drop.
South Texas Oil
On the other hand, South Texas oil production is expected to be up 3.8% YOY in 2024 and the forecast is revised higher from the prior reporting period by ~.06%. SM Energy’s planned activity guidance is unchanged from the prior reporting quarter. The company is still targeting more oil-based wells and stronger oil production in 2024. The company delivered better than expected well performance in Q2 2024, beating the high end of guidance. EOG Resources’ 2024 efficiency gains are expected to continue into 2025 for the South Texas subregion with an emphasis on more oil production.
Northeast NG
2024 production in the Northeast is expected to be lower YOY by 0.3%. However, the production forecast for 2024 is revised higher by 0.1% from the prior reporting quarter. Producer efficiency gains have been offsetting curtailments & deferred TILs (DTILs). EQT continues to see stronger than expected performance from their wells. The company expects to see continued improvement in completion times for the remainder of 2024 and into 2025. EQT’s Q2 2024 production was above the high end of their production guidance range after adjusting for curtailments.
National Fuel expects to grow production and decrease CapEx at the same time for the remainder of 2024 and for all of 2025. Various other producers in the Northeast are showing similar patterns of well outperformance and flat or higher production with simultaneously lower CapEx.
Overall, Northeast production for 2024 has been revised from the prior reporting period, with lower production expectations for September and October 2024 but higher production expectations in November and December 2024 to account for higher DTILs in 2024 as compared to 2023.
3 Year NG Production Forecast
The 3-year forward curve for natural gas is incentivizing significantly higher production, especially when factoring in annual compounded efficiency gains in drilling and completions. In the Lower 48 US, there are enough pipeline capacity and LNG liquefaction additions to allow for significantly higher production especially in Texas & Louisiana.
Although the Northeast could use more interstate pipelines to further expand production, future pipeline additions and expansions will still allow the region to expand production modestly over the next 3 years. The compounded annual growth rate in Lower 48 natural gas production from 2025 until 2027 is expected to be ~3% per annum.
The 3-year forward curves at Dominion South & Waha are also incentivizing significant natural gas production growth. Pipeline capacity additions in the Northeast indicate modest Northeast production growth. From 2025-2027, Permian natural gas production is expected to grow ~6% per year, Haynesville natural gas production is expected to grow ~5.5% per year, and Northeast natural gas production is expected to grow ~2% per year.
3 Year Oil Production Forecast
The 3-year forward curve for oil is incentivizing some production growth in the US, but not as much as the natural gas forward curve. The forward curve for WTI crude oil is at its usual state of backwardation.
Efficiency gains in drilling and completions are equally as strong for oil as they are for natural gas. Oil efficiency gains have been stronger due to the strong efficiency gains in the oil dominant Permian basin. From 2025-2027, the compounded annual growth rate for US oil production is expected to be ~1.4% per year.
From 2025-2027, oil production in Texas is expected to grow ~2.5% per year, oil production in New Mexico expected to grow ~2.6% per year, and oil production in North Dakota is expected to grow ~1.7% per year.
Summary
The 2024 long-term production forecast for natural gas is revised slightly higher from the prior reporting period by 0.1% or ~ 0.1 Bcf/d from September 2024 until December 2024. Q3 2024 to Q4 2024 exit-to-exit production is expected to be higher by 2.0 Bcf/d as Northeast shut-in production volumes disappear with higher pricing, producers increase activity levels, Matterhorn Express Pipeline comes online, and deferred TILs in the Northeast get TILed into the market beginning around mid-November 2024 when natural gas pricing is much improved. This also assumes minimal production freeze-offs during Q4 2024. Producer efficiency gains continue in 2024 with many producers guiding towards flat YOY production while simultaneously lowering capital expenditures by 10% YOY. Producers can still increase production without expanding activity and capital expenditures. Producer efficiency gains are expected to carry forward into 2025. The 3-year forward curve for natural gas is incentivizing significant natural gas production growth. Pipeline capacity additions, new pipelines, and new LNG liquefaction demand are factored into the forward curve for natural gas, thus incentivizing producers to ramp up production, especially when factoring in additional efficiency gains from drilling to fracing into the 2025-2027 period.
The long-term production forecast for US oil is revised higher from the prior reporting period by ~0.15% or ~20k Bbls/d. 2024 US oil production is expected to be higher YOY by 2.15%. Oil producers have been outperforming natural gas producers by an even greater amount on a percentage-wise basis. This has especially been the case in the Permian basin. Crude oil production is expected to remain flat during Q3 2024 and then ramp up in Q4 2024. The 3-year forward curve for WTI crude oil is at its usual state of backwardation and hovering around the mid-$60 price range. As a result, the market is incentivizing lower oil production growth during the 2025-2027 period than during the 2023-2024 period.