SOURCE: Energy Solutions, Inc.

Energy Solutions, Inc.

February 23, 2012 14:21 ET

Natural Gas Prices in 2012 Will Be the Lowest of This Decade

Natural Gas Production Growth of Nine Percent in the Past Year, Combined With Record Storage Inventories Will Push Natural Gas Prices to a New Calendar-Year Low by the Fall of 2012

VERONA, WI--(Marketwire - Feb 23, 2012) - Natural gas prices are expected to hit a ten-year low in 2012. According to Energy Solutions, Inc., a leading provider and publisher of information on natural gas markets and prices, growth in U.S. natural gas production and record-level storage inventories will push natural gas prices to a ten-year low by the fall of 2012, despite announced production cuts.

Low natural gas prices are causing some producers, like Chesapeake Energy Corp., to slash production in certain regions, and some are moving their drilling efforts from natural gas shale plays to crude oil plays. However, other producers are dealing with low natural gas prices by focusing on natural gas plays that contain a high level of natural gas liquids or NGLs. NGLs, a byproduct of natural gas production, are stripped away and sold separately based on crude oil prices. As a result, NGLs supplement a producer's natural gas revenue stream. Alternatively, other producers have continued their search for natural gas because of forward sale-price hedges that allow a producer to reap a profitable final realized sale price.

Current actions by producers are expected to have a minimal price impact in 2012 because year-over-year production levels have significantly climbed, and a mild winter has pushed storage inventories to record highs. In addition, a rising focus on crude oil drilling has increased the amount of associated gas, which is produced as a byproduct of crude oil production. Over the past year, the active natural gas drilling rig count in the U.S. has fallen by 20 percent, while the active crude oil drilling rig count has risen by 60 percent. This shift in drilling rigs did not cause natural gas production levels to decline as expected, and this is partially because the amount of associated gas being produced was dramatically underestimated.

Energy Solutions, Inc.'s analysis, Natural Gas Price Outlook, provides an in-depth, comprehensive review of the current U.S. natural gas market and how it is expected to change over the next 24-36 months, including industry challenges and implications. Natural Gas Price Outlook details why increased natural gas demand from the electric power sector, plans for natural gas exportation, and the positions being held by the speculative sector are key factors that will prompt a transition to higher natural gas prices, beginning as early as the fourth quarter of 2012.

In addition to the above, Natural Gas Price Outlook evaluates numerous other factors and the influence on natural gas prices through 2015, including changes in pipeline infrastructure, new sources of natural gas demand, and the environmental impacts of horizontal drilling and hydraulic fracturing. Natural Gas Price Outlook is available at a discounted rate of $179 through March 9, 2012. For more information, to view an executive summary or to reserve your copy, visit www.NaturalGasOutlook.com or call (608) 848-9589.

About Energy Solutions, Inc.
Energy Solutions specializes in providing straightforward, trustworthy and timely information on natural gas markets and natural gas price direction, providing businesses the tools needed to make crucial decisions to protect their bottom line and improve their competitive edge.

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