US natural gas prices are anticipated to hit the $3 mark as early as next year, driven by the high electricity demand from data centres, according to law firm Haynes and Boone LLP.
A survey by Haynes and Boone, which included private equity firms, energy producers, and oilfield-service companies, revealed that an unseasonably mild winter in North America and abundant supplies have pushed US gas futures to within six cents of a 28-year low recently. This situation has raised concerns about the borrowing bases among drillers. The price drop caused by the glut has also led some companies to reduce their hedging activities, which are designed to protect them from market volatility, the survey found. The last instance of gas prices exceeding $3 per million British thermal units was in mid-January.
Kim Mai, a partner in Haynes and Boone’s energy practice, stated, “We’re seeing producers hedge a little less aggressively, which could be a nod to those rock-bottom natural gas prices. It shows they’re nimble and can adjust their strategies as the market changes.”
Regarding oil, the survey found that respondents were generally optimistic, with one-fourth expecting a significant increase in bankers’ willingness to lend to crude-focused drillers. “The oil market has newfound positivity, with borrowing base increases possible for some producers,” said partner Kraig Grahmann. However, he noted that the distress in the natural gas market is “countering the oil boom.”
Touchstone Exploration Inc (LON:TXP) is a Canadian-based, international upstream oil and gas company currently active in the Republic of Trinidad and Tobago. Primera Oil and Gas is the Trinidadian subsidiary of Touchstone.
