Most top-ranked North American natural gas marketers report volume drop in Q4 2020

New York — Most of the top North American natural gas marketers saw year-on-year declines in volumes sold in fourth-quarter 2020, with BP leading the pack, dropping more than 3 Bcf/d as the company continues to expand its renewable energy projects.

BP's sale volumes still ranked No. 1 in the S&P Global Platts North American Gas Marketers rankings for Q4 2020 at 16.83 Bcf/d, down 16% from Q4 2019.

"We introduced a new strategy to transition from an international oil company to an integrated energy company — and started to execute on it on multiple fronts — including entering offshore wind in the United States," said BP CEO Bernard Looney.

Macquarie Energy, Tenaska, Shell Energy North America, and ConocoPhillips rounded out the rest of the top five.

The largest year-on-year increase occurred in the bottom half of the ranking. Tennessee-based Eco-Energy boosted marketed volumes 64% year on year. As a result, it jumped eight spots to No. 21 from a year prior.

"In terms of our increase in volumes — it really is just attributed to listening to our customers and solving their problems," said company spokesman Thomas Gray. "We are very much a physical shop that is solving a customer's logistical problem in a very transparent manner. Along the way, we've been fortunate enough to hire regional experts and scale the business in a very intentional manner."

In late 2019, Eco-Energy acquired Stone Mountain's Appalachian gas-gathering system, adding 600 miles of gathering lines with maximum capacity of 600 MMcf/d.

Most companies posted year-on-year declines because of divestitures and lowered output from the demand and price collapse stemming from the coronavirus pandemic. For example, Occidental Petroleum's North American sales fell 23%, but Antero boosted its year-on-year output 14% to 3.66 Bcf/d.

US gas prices look to be much stronger in 2021.

The natural gas benchmark Henry Hub in Louisiana made significant strides in late 2020 and continued to strengthen in February 2021, but elevated US production in March might limit prices this summer.

US gas production has surged back above 92 Bcf/d following the sharp drop to 75 Bcf/d in February from unprecedented production freeze-offs. Most regions have largely recovered to pre-freeze-off levels, according to S&P Global Platts Analytics.

While expectations entering 2021 were for widespread associated gas production declines given the lack of drilling activity in crude-focused plays, those forecasts have failed to materialize as gas-to-oil ratios have risen and favorable returns for oil drilling have accelerated the drawdown of drilled and uncompleted wells while encouraging the deployment of additional rigs, namely among private operators.

Despite the recent selloff at Henry Hub, a sample of the major dry gas producers in the Northeast and Haynesville reveals they have hedged roughly 70% of their 2021 gas production at $2.70/MMBtu, 10 cents above the current summer strip. This should help keep most operators immune to the recent dip in prices and ensure production momentum seen the past few months continues most of the summer.

A summer price near the $2.50-$2.60/MMBtu range is within reason, assuming current production levels hold flat. But any further upside to production may force prices below $2.50/MMBtu to encourage the next tranche of coal-to-gas switching. That being said, the March selloff of the Henry Hub summer strip also has widened LNG netbacks this summer to near $2.00/MMBtu, pointing to potentially higher utilization of LNG exports and providing a floor of support for Henry Hub at $2.50/MMBtu.