- Britain to start sale of Lloyds soon, review RBS split |
- British Supreme Court ruling threatens Western sanctions against Iran
- Steve Carell returns in 'Despicable Me 2' as a dad with doubts
- Sao Paulo, Rio revoke transport fare hikes as protests continue |
- Bernanke says Fed likely to reduce bond buying this year |
RPT-UPDATE 2-More firms expected to follow Conoco in gas shut in
(repeats to fix typo)
* Shut in gas likely not from horizontal drilling
* Other producers expected to follow suit (Recasts lead and following two paragraphs, adding comment from Conoco CEO on gas prices. Updates NYMEX futures price in paragraph 13.)
NEW YORK, Oct 27 (Reuters) - ConocoPhillips (COP.N) shut in a small amount of its natural gas production in the third quarter and would like to shut in more at current low prices, but some of its partners need to drill, chief executive Jim Mulva told analysts during a conference call Wednesday.
"We think the price levels we see today are unsustainable," he said.
For the fourth quarter, the company said it expects curtailments of 20,000 to 30,000 barrels of oil equivalent per day.
Conoco reported in its earnings Wednesday morning that it had shut in a small amount of its gas production in the third quarter, a move that could set the stage for other producers to curtail production as an oversupplied market depresses prices, an analyst said.
Conoco, the third-largest U.S. oil company, shut in about 180 million cubic feet of natural gas per day in North America, a minuscule amount of its total production.
"We expect there's going to be more companies talking about (shut ins)," said Anthony Montano, director of oil and gas equity research with Ticonderoga Securities in New York.
He added that Conoco likely shut in production from the acreage it received as part of its acquisition of Burlington Resources. A Conoco spokesman was not available to confirm where production was shut in.
Conventional wells, or those traditionally drilled vertically, are generally more costly than their horizontal counterparts.
The proliferation of "unconventional" or horizontal wells drilled into shale rock to push gas out of the cracks in between is largely credited with the market's oversupply. Horizontal technology has improved in the last few years, driving down costs and making gas coming from those wells more competitive.
Drilling conventional wells makes economic sense when gas is $8 to $10 per million British thermal unit (mmBtu), but not at the current price of $3.30, Montano said.
Conoco acquired acreage set up for conventional gas and coalbed methane production in the San Juan Basin, located in northwestern New Mexico and southwestern Colorado, as part of its acquisition of Burlington, which was completed in 2006.
Natural gas prices have tumbled 40 percent since the beginning of the year and are expected to decline further as supplies of shale gas continue to build.
Total gas in U.S. storage is at its second highest level ever for this time of year at 3.683 trillion cubic feet.
November natural gas futures NGc1 on the New York Mercantile Exchange were trading around $3.339 per mmBtu on Wednesday.
Natural gas prices still have yet to hit the seven-year low they reached in September 2009 at $2.409/mmBtu.
ConocoPhillips said on Wednesday that its quarterly profit more than doubled as crude oil and natural gas prices rebounded from a year earlier. [ID:nN27197577] (Reporting by Jeanine Prezioso. Additional reporting by Anna Driver) ((firstname.lastname@example.org; +1 646 223 6241 Reuters Messaging: email@example.com))
- Tweet this
- Share this
- Digg this