Natural gas production in the Haynesville basin was down slightly in September 2023 to 16.65 Bcf/d compared to 16.91 Bcf/d in August 2023. The reason for the lower month-on-month production in September is likely due to producers in the region by curtailing production or choking back on wells. The producers are also probably restricting some of the new wells that should’ve come online by now by delaying their TILs (turn-in-lines). The reason is all due to low spot natural gas prices in the months of September and October combined with much higher prices as we get into the winter months beginning in November. Once we get into the winter months, Haynesville producers will likely bring on their delayed TILs and not curtail any additional production.
The curtailment of production and the delaying of TILs has been done before by Comstock Resources, one of the largest producers in the Haynesville basin. Comstock Resources temporarily curtailed production and delayed the advent TILs in September 2020 and October 2020. Natural gas prices back in the fall of 2020 were identical to where they are now in 2023 and there were similar worries about overfilling of storage by the end of the summer 2020 season. Very similar to what is going on currently in the region. Below is an excerpt from the Comstock Resources 3rd quarter 2020 analyst conference call quoting Roland O. Burns, the President and Chief Financial Officer.
“So, the only gas that's really impacted by these daily prices is what we call our swing natural gas that was not sold during mid-week and are not part of our baseload sales. So, we chose to restrict some of the new wells that were coming on in September. And then given that's very low price that this extra swing gas was getting and these high differentials in the month of September, and the declining overall index prices in that volatile month did cause our overall differential in the quarter to widen by $0.10 in the third quarter.
This situation did continue into October, really only the first couple of weeks of October. And then we took an action in the very first part of October to actually curtail, for price reasons, 300 million a day of our production. And overall, we did this for about 11 days. That action, along with the start-up of our LNG facilities, coming back after the hurricanes, really helped reduce the concerns about storage filling up. And then we saw that the -- about mid-October, we saw the daily cash prices go back into normal relationship and differentials narrow. And then we put all that gas really back into the market. So, I think as October has finished out and as we entered November, we've seen a very healthy situation which has been supported by very favorable kinds of injections to storage and even today, a withdraw. “
Today’s pricing environment is very similar to what was happening in 2020 and it is very likely that Comstock Resources and other producers in the Haynesville basin have been curtailing some production and delaying TILs in September and some of October until we get into the winter months of the November 2023 to March 2024 winter season with much higher natural gas pricing. We shall find out for sure when Comstock Resources reports earnings on October 30th and does their analyst conference call on Halloween. Stay tuned!
Hyperion Update
Frac crews in the Lower 48 US have rebounded as expected from the lows due to producers increasing activity in order to take advantage of much higher natural gas winter pricing and $90/Bbl WTI crude oil pricing.
Rigs in the Lower 48 US are still hovering around the lows of the year.
Frac crews are expected to rebound first in order to increase production within a month or two from now to take advantage of much higher natural gas winter pricing and $90/Bbl crude oil pricing. Rigs should follow to the upside in a month or two from now as producers will need to build DUCs next year. Stay tuned to the Hyperion channel!
