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It's time for our quarterly natural gas forecast update. The updated long-term regional natural gas forecast is now live for customers to view and download through our online portal, API and Snowflake.
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Hyperion’s long-term natural gas production forecast is based on the producer guidance forecast from publicly traded natural gas producers along with an adjustment to account for the activity of private producers. The production is updated quarterly as producers report their earnings and production guidance forecasts. Hyperion keeps track of all the producers’ fracking crew activity on a real time basis for both private and public producers, which allows for an adjustment to account for the activity of private producers in order to improve upon the production forecast based on publicly traded producer guidance forecasts.
The long-term natural gas production forecast is done for the Lower 48 US and is also done by sub-region which includes Southwest PA, Northeast PA, West TX, South TX, Haynesville TX, Haynesville LA, Permian, New Mexico, Colorado, Oklahoma, Ohio, West Virginia, and North Dakota. All the sub-regional forecasts use public producer guidance forecasts along with an adjustment for private producer activity. Production forecasts go out towards the end of 2023 and are a monthly average forecast. One key factor in 2023 is that most of the oil dominant basins (Permian, Eagle Ford, Bakken) will see faster natural gas production growth than most of the natural gas dominant basins (Marcellus, Utica, Haynesville). Listed below is a summary of the production forecasts for the major natural gas producing sub-regions.
Lower 48 US
The Lower 48 US forecast is revised lower from the prior reporting quarter. While Lower 48 US production is expected to be up 2.8% in 2023 compared to 2022, production from March-2023 until the end of the year is now expected to be flat. The public producer survey has overall production up 2% year-on-year for 2023. After adjusting for 40% higher year-on-year fracking activity from the private producers, overall Lower 48 US production is expected to be higher by 2.8% year-on-year. However, a 2.8% year-on-year growth in 2023 production implies that production from March-2023 until the end of the year will be flat.
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West Texas, or the Permian (not including New Mexico), is one of the fastest growing producing basins in the Lower 48 US. Private fracking activity has been about 50% higher than public fracking activity. The growth is led by oil as oil pricing economics have been relatively more attractive than natural gas pricing economics. Oil prices have been dropping precipitously since production guidance forecasts were made in late February to early March, so it will be interesting to see if there will be a pivot from the Permian producers when they report their 1st quarter 2023 earnings in late April to early May. Overall, West Texas natural gas production is expected to be higher by 8.1% compared to 2022 with significant sequential growth from March-2023 until December-2023 of about 7.5%. The West Texas forecast is revised lower overall from the prior reporting quarter with a lower revised forecast in the first 3 quarters and a higher revised forecast in the 4th quarter of 2023.
South Texas
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South Texas (Eagle Ford) is seeing some shifting away from the natural gas areas of the basin towards the oil areas of the basin. SilverBow Resources is one such company where they shifted their 2 rigs from the natural gas areas in the Eagle Ford towards the oil areas in the Eagle Ford. Private fracking activity has been about the same public fracking activity. South Texas natural gas production in 2023 is expected to grow 3.7% compared to 2022 with roughly flat production from March-2023 until December-2023. The South Texas production forecast is revised lower from the prior reporting quarter.
Pennsylvania, Ohio, & West Virginia
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Pennsylvania is expected to see a year-on-year decline in natural gas production. Relatively unattractive economics, a lack of additional pipeline capacity, and some significant operational problems from CNX Resources is leading to a 2023 year-on-year decline of about 2% in the Marcellus basin. The Utica basin in Ohio is also expected to be lower by about 0.9% in 2023 compared to 2022. The decline in the Utica basin will be more muted due to increased activity from EOG Resources in the region. Production in both Pennsylvania and Ohio is expected to be slightly higher from March-2023 until December-2023 due to the resolution of operational problems at CNX Resources and improved wintertime pricing economics for the months of November-2023 & December-2023. West Virginia should see year-on-year production growth of 1.8% in 2023 based on producer guidance for the region.
Haynesville Texas & Louisiana
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Haynesville Louisiana is one basin where rig count activity is expected to drop year-on-year based on what the large producers such as Chesapeake Energy, Southwestern Energy, & Comstock Resources have said in their producer guidance. Production in Haynesville Louisiana is expected to be higher by 3.4% in 2023 compared to 2022. However, March-2023 production is expected to be flat to December-2023 production based on the expected slowdown in rig activity and fracking activity. The Haynesville Louisiana forecast is revised lower from the prior reporting quarter.
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Haynesville Texas production is expected to be higher by 12.1% in 2023 compared to 2022 with some sequential growth from March-2023 until December-2023. Activity is expected to increase due to substantial success in initial production rates for wells in the Bossier part of the region that Comstock has discovered. The new Texas Haynesville forecast is revised higher from the prior reporting quarter.
New Mexico
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Natural gas production in New Mexico is expected to grow due to growth in the oil driven Permian part of the state. Overall, New Mexico production is expected to grow 4% in 2023 compared to a year ago in 2022, along with some sequential growth in production from March-2023 until December-2023. The Nex Mexico forecast is revised higher from the prior reporting quarter.
Colorado
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Colorado is also expected to have some decent growth in 2023 due to Occidental’s and PDC Energy’s increased well productivity in the region, the ability of PDC Energy to politically crack the code in being able to obtain more permitting in the region, and that the region is more of an oil play. Production in the state is expected to be higher by 3.5% in 2023 versus 2022. There will likely be some sequential production growth from March-2023 until December-2023. The new Colorado forecast is mostly unchanged from the prior reporting quarter.
Oklahoma
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Oklahoma is expected to see decent growth in natural gas production due to associated growth in oil production. Natural gas production in the state is expected to be higher by 5.4% in 2023 compared to 2022. Some sequential growth in production is also expected from March-2023 until December-2023. The new Oklahoma production forecast is revised slightly higher from the prior reporting quarter.
North Dakota
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Based on producer guidance from Hess Corporation, North Dakota is going to see a significant increase in production activity in the region since it is mostly an oil basin. North Dakota production was hit substantially in 2022 due to multiple freeze-off events that will probably not repeat themselves this year. On that basis alone, production in the state will increase on a year-to-year basis. Producer guidance suggests that North Dakota production will be higher in 2023 by 7.3% when compared to 2022. There will also likely be sequential production growth from March-2023 until the end of 2023. The new North Dakota production forecast is revised lower from the prior reporting quarter.
Summary
Hyperion’s forecast for Lower 48 US production is lower than most of the current analyst forecasts. Public producer guidance currently estimates a 2% year-on-year increase for 2023 natural gas production. After adjusting for higher private producer activity in the Lower 48 US, production is forecasted to be 2.8% higher in 2023 compared to 2022. The oil dominant basins (Permian, Bakken) will see higher natural gas production growth than the natural gas dominant basins (Marcellus, Haynesville) due to relatively more attractive economics for oil production. The new production forecast is lower for the Lower 48 US compared to the prior reporting quarter (old forecasts). Most of the regional and sub-regional forecasts have been revised lower from the prior reporting quarter.
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