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 in order 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
Natural gas prices as measured by the July 2024 futures contract have been up slightly since early March 2024 and are now above drilling completion costs at around $2.30 / MMBtu. The long-term production forecast for 2024 was revised down from flat YOY to down 0.8% YOY. The great majority of the downward revision is from West Texas and Permian New Mexico due to the longer than expected commencement date of Matterhorn Express Pipeline from our original target date of July 2024 to the new target date of October 31, 2024. Production is expected to increase in Q3 2024 and Q4 2024 with a strong recovery in Q4 2024 based on full year producer guidance estimates, actualized year-to-date production, producers stating in their analyst conference calls that they plan on increasing activity and production in the 2nd half of 2024, and the advent of Matterhorn Express Pipeline.
EQT brought back their curtailed 1 Bcf/d of Southwest Pennsylvania natural gas production in the second half of May 2024 as Dominion cash prices rebounded back above $1.50 / MMBtu. This production should stay online and not be curtailed again as long as monthly FOM index prices stay above $1.50 / MMBtu.
US Oil
The long-term oil production forecast is unchanged from the prior reporting period in March-2024. The long-term oil production forecast for every basin and sub-region has been left unchanged from the prior reporting period in March-2024. US oil production is expected to be up 2.7% YOY in 2024. Producers continue to have success with simufracing, trimulfracing, and U-turn 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 second half of 2024.
Haynesville NG
It is still a tale of two Haynesville’s in 2024. Haynesville TX natural gas production is expected to be up YOY slightly in 2024 as production recently went to year-to-date highs with wells in the Bossier being economic at $2.10 / MMBtu and IP rates greater than 30 MMcf/d on average. Comstock Resources continues to have big success in Western Texas Haynesville as they are looking to maintain and or increase their activity levels in Western Haynesville. Haynesville LA will be down 9.1% YOY in 2024 due to lower implied production guidance from Southwestern Energy and from lower activity in the subregion. Chesapeake sees a sharper decline in their production during Q2 2024 and then flattening out in the 2nd half of 2024 with improving market conditions.
West Texas NG
West Texas natural gas production for 2024 is expected to be slightly lower YOY by 0.1%. This is revised lower by 3.2% from the prior reporting quarter due to the later starting date for Matterhorn Express Pipeline. Our original estimate was for the pipeline to commence in July 2024 but according to Devon Energy (who has an investment stake in the pipeline) the pipeline is expected to come online at the end of October 2024. Matterhorn Express Pipeline should increase Permian natural gas production significantly and should debottleneck the basin. Chevron still expects their Permian production to ramp up in the second half of 2024.
West Texas Oil
2024 West TX oil production is expected to be higher YOY by 4.8% and the forecast is unchanged from the prior reporting quarter. EOG Resources expects to grow oil volumes in 2024. Matador Resources is expected to expand oil production by double digits in 2024. They are also experimenting and having success with trimulfracing and so-called U-Turn wells. Both trimulfracing and U-Turn wells have the potential of further significantly increasing production per well and per frac crew in the Permian leading to greater efficiency gains into 2024 and beyond. Ovintiv said that 50% of their wells will be trimulfraced in 2024 compared to 25% of their new wells in 2023. Overall, oil production should sequentially grow throughout 2024 in West Texas.
South Texas NG
South Texas natural gas production for 2024 is expected to be up 2.5% YOY but has been revised downward from the prior quarter. Producers like SilverBow are still shifting resources from NG wells to oil wells in 2024 due to low natural gas prices. SilverBow expects their NG production to be down 3% YOY in 2024, while their oil production will be up 10% YOY. The company continues to see strong production and seeing strong well productivity and success from their refrac program. They initiated their refrac program in Q1 2024 and it looks to be enhancing well productivity.
South Texas Oil
South Texas oil production is expected to be up 3.8% YOY in 2024 and the forecast is unchanged from the prior reporting period. SM Energy’s planned activity guidance is unchanged from the prior reporting quarter as the company looks for more oil-based wells and stronger oil production in 2024. The company delivered a better than expected well performance in Q1 2024, beating the high end of their guidance. EOG Resources still sees their 2023 efficiency gains continuing into 2024.
Northeast NG
Northeast natural gas production is expected to be down 0.4% YOY. The forecast is revised lower by 1.4% from the prior reporting period. Mountain Valley Pipeline is expected to come online in June 2024. However, don’t be surprised by further unforeseen delays for the pipeline. The pipeline online start date could be delayed until November 2024 for a worst-case scenario. MVP should increase natural gas production by 0.5 Bcf/d in the Northeast.
EQT’s 1 Bcf/d of curtailed Southwest Pennsylvania dry gas production has returned as Dominion cash prices rebounded. EQT’s break-even for dry gas with no natural gas liquids or oil netback is $1.27 / MMBtu. EQT would’ve outperformed in their production midpoint guidance were it not for the curtailed production.
CNX Resources continues to deliver strong results due to continued drilling efficiencies and cost reductions. The company lowered their production guidance for 2024, indicating that they elected to delay completion activities on 3 Marcellus Shale pads consisting of 11 wells due to the challenging near term natural gas market conditions. For the remainder of 2024, the company’s production is expected to move lower in Q2 2024 and then increase during the 2nd half of the year.
Summary
The 2024 long-term production forecast for natural gas is revised lower from the prior reporting period (March-2024) by 0.8% or ~ 1 Bcf/d from July 2024 until October 2024. Q2 2022 to Q4 2024 exit-to-exit is expected to be higher by 3.3 Bcf/d as shut-in production volumes return, producers increase activity levels, Matterhorn Express and Mountain Valley Pipeline come online, and deferred TILs in the Northeast get TILed into the market. The great majority of the production increase will occur during Q4 2024 especially during the months of November and December 2024, barring any significant production freeze-offs. Producer efficiency gains continue into 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.
The long-term production forecast for US oil is unchanged from the prior reporting period. 2024 US oil production is expected to be higher YOY by 2.7%. There has been little change pricewise in the oil market since our last update in March-2024 and producers have kept their oil production guidance forecasts the same as compared to the prior reporting period. US oil production is also benefiting from the production efficiency gains that are prevalent in US natural gas.