Chesapeake (CHK), Others Pressured on Expectations of Slower Growth at Key Nat Gas Play

February 15, 2013 11:35 AM EST
Chesapeake Energy (NYSE: CHK), Petroquest (NYSE: PQ), EOG Resources (NYSE: EOG), and other nat gas players are lower today amid more negative news for the industry.

According to the Marcellus Shale Coalition, production is expected to slow in 2013 as producers work to expand pipelines, wait for markets to develop, and look for gains in wholesale prices. A rep for the coalition told the Washington Post (WaPo) that hiring has tapered and firms seem to be in a holding pattern.

Recent moves have been in stark contrast to activity in the area over the last few years, when production doubled or tripled every six months as companies spent billions aiming to secure leases and drill wells.

In 2012, production in the region which encompasses Pennsylvania, Maryland, West Virginia, New York, and Ohio, rose to about 2.7 trillion cubic feet, more than double that of 2011. One estimate from research firm Bentek has output in the Marcellus Shale growing 30 percent for 2013, though numerous factors might still affect final results.

One ITG analyst echoed the comments, seeing growth slowing. The analyst also noted that output from each well is improving, which will help to cut down overhead.

Nat gas March 2013 contracts are modestly higher on the session Friday, trading up $0.014 to $3.177/mmBtu. Though a 157 billion cubic foot draw last week was less than expected, colder weather across much of the U.S. is expected to return over the weekend and into next week.

Chesapeake is down 1.7 percent, while Petroquest is off 3.8 percent, and EOG is down 2.7 percent. The United States Natural Gas (NYSE: UNG) ETF is slightly lower on the session.


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