Oil Pain; Gas Gains
While painful for oil producers, this weeks crude price drop is precisely what is needed to keep the natural gas rally alive. The most obvious catalyst is further reduction in associated gas as oil production falls further in 2021E (NO chance of making it to the 200 fleet minimum). But more importantly, production from dry gas basins is also waning, continuing a trend that started over a year ago (long before covid) when operators first cut frac fleets and committed to sustained capex reductions. Looking forward, our model suggests dry gas basins now need to increase their rig / fleet count by 70-150%, just to plug the hole from lower associated gas production, an almost impossible task under current funding constraints.
For access to the full report visit: https://corasresearch.com/reports/