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Highlights

Output up 1.9 Bcf/d led by Haynesville, Appalachia

Henry Hub cash price averages $6/MMBtu in 2022

Most producers leave FY 2022 guidance unchanged

Second-quarter production gains from the Haynesville, Appalachia, the Permian and the SCOOP-STACK have led US natural gas output higher by nearly 2 Bcf/d recently, helping to ease supply tightness in the US gas market. Based on recent producer guidance, though, further production gains anticipated over the balance of 2022 are unlikely to offer end-users an overnight fix for high gas prices.

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In June, US natural gas production has edged up to an average 94.5 Bcf/d, rising nearly 1.9 Bcf/d, or roughly 2%, compared with a first-quarter average at 92.6 Bcf/d, Platts Analytics data shows.

Much of the recent production gain has come from the Haynesville, where output has grown by nearly 600 MMcf/d since March amid a surge in the rig count to over 70 -- its highest in a decade, according to data from Enverus. Combined gains from the Marcellus and the Utica have totaled about 420 MMcf/d over the same period. Permian growth ranks third, with gains totaling about 380 MMcf/d since March, followed by the SCOOP-STACK, where production is up 280 MMcf/d.

Along with smaller gains from other basins, US production has staged a slow but steady comeback in the second quarter after falling sharply in the new year from highs around 96 Bcf/d in late 2021.

Recent production gains have been welcomed by industrial end-users, utilities and other price-sensitive consumers that have suffered under a Henry Hub cash price averaging nearly $6/MMBtu this year, data from S&P Global Commodity Insights shows. With further production gains likely to yield low single-digit growth, though, relief from high gas prices is unlikely to come before mid-2023, or potentially later.

Prices

Following an unforeseen shutdown at Freeport LNG in mid-June, benchmark US gas prices have fallen sharply to the upper-$6/MMBtu range in cash and futures markets recently, offering consumers some reprieve from prices that briefly topped $9 in late May and early June.

On June 21, the Henry Hub balance-2022 forward curve settled at an average $6.80/MMBtu, down from $8.18/MMBtu just one month ago. While the near-term curve has weakened considerably, prices from Q2-2023 onward have changed little. As of late June, the Henry Hub April 2023 to December 2023 contracts are now priced at an average $4.92/MMBtu, up from an average $4.87 one month ago, Platts' most recent M2MS forward price assessments show.

Production

The forward market's expectation of higher-for-longer gas prices comes as many US gas producers continue to project flat, or at best, marginal production growth in 2022. On recent first-quarter 2022 earnings calls, some of the largest US natural producers left full-year guidance nearly unchanged, including Antero Resources, Coterra Energy, EQT, Range Resources and Southwestern Energy. Among the largest dry gas producers, only Chesapeake Energy projected meaningful growth in 2022, with an expected 500 MMcf/d increase in full-year 2022 production versus Q1.

Among the major oil producers, the story was much the same with Chevron and ExxonMobil among the few Permian Basin producers projecting significant year-on-year growth in 2022.

At Chevron, CEO Mike Wirth touted the company's record Q1 production in the Permian on the company's most recent quarterly earnings call, saying it would raise full-year guidance for its Permian output to 700,000-750,000 boe/d in 2022, nearly 20% higher than its 608,000 boe/d average in 2021. At ExxonMobil, CEO Darren Wood continued to project an annual 25% growth rate for its own Permian production this year after raising output to 560,000 boe/d in late March 2022, from 460,000 boe/d in Q4 2021.

Among many of their peer producers in the Permian Basin, full-year oil and gas production guidance was unchanged or adjusted upward only modestly on first-quarter earnings calls. Among those projecting maintenance or low-single-digit growth were ConocoPhillips, Continental Resources, Ovintiv, Pioneer Natural Resources and Diamondback Energy, along with others.

According to Platts Analytics, combined gains in dry and associated gas production could lift US output to the high 97 Bcf/d range by the late fourth quarter -- about a 3 Bcf/d, or 3%, gain over current production.