US natural gas prices have fallen to their to their lowest levels in 10 years. The Financial Times reported, “The price collapse – down 85% from an all-time high in 2005 – could benefit heavy industries in the US but is likely to hurt companies such as ExxonMobil and BHP Billiton, which have spent billions of dollars over the past three years to exploit natural gas fields in the US.”
"We will have some shut-ins of natural gas going forward," said COP chief financial officer Jeff Sheets in a conference call with analysts, according to a Dow Jones report. "It's going be on the order of 100 million cubic feet a day or something like 15,000 to 20,000 [barrels of oil equivalent] per day going forward."
ConocoPhillips’ fourth-quarter natural-gas production for Canada and the US lower 48 states was about 2.5 billion cubic feet per day, or about 410,000 boepd.
ConocoPhillips said it was difficult for the company to shut in more natural gas production because the bulk of its current output is linked to oil liquids production, which is profitable, Sheets said.
A significant part of ConocoPhillips' natural gas production is also operated by partners who do not want to shut in and lose the cash flow associated with it, Dow Jones quoted Sheets as saying.
ConocoPhillips still expects natural gas prices to rebound in the long term to between $5 million and $6 per million British thermal units as more producers are forced to cut drilling and production amid low commodity prices, Sheet told Dow Jones.
For the US, average implied proved oil reserves values at the end of 2011 were higher than in 2010 and closer to the highs observed in 2008. However, gas reserves decreased during the same period to $10.7/BOE inching closer to their 2009 lows.
This crash in prices has resulted in Talisman Energy pulling rigs from its North American gas plays. Talisman is reducing its expenditure in the Marcellus shale region of United States and in the Montney region of British Columbia. “We’ve been pretty consistent that the break-even price at the Marcellus is $3.50-$4 (per mmBtu) and that’s why we drilled and spent the money there – because we were making money,” Scott Thomson, Talisman’s CFO said, “I find it surprising that people haven’t pulled back on gas spending.”
Bloomberg has recently reported “KKR’s TXU Buyout Faces 91% Default Odds in Shale Boom“. about the pessimism about the chances of KKR & Co. and TPG Capital being able to salvage the biggest leveraged buyout in history — the $43.2 billion purchase in 2007 of the electricity provider known then as TXU Corp. Since the acquisition, natural gas prices have tumbled 50% also resulting in a cut in electricity prices in half.