The Rise Of Natural Gas: To Infinity And Beyond!

Although Toy Story’s Buzz Lightyear became our new superhero in the mid-90s with his iconic term of ‘Infinity & Beyond’, natural gas drillers are on a mission to adopt it after years of depressed pricing. The pandemic, aggressive drilling growth through debt, low inventories and a push to reduce our carbon footprint is increasing the probability that the Henry Hub can breach $6.00/Dth or higher in 2022. It was in December of 2009 that it crossed over to a high of $7.26 while a year earlier it was double that at $14.00.

Impossible? Who would have forecasted natural gas trading at $1.49 a year ago?

Henry Hub Historical Price Table

Producers last year significantly reduced drilling activity with both crude oil and natural gas. Yes, demand was down but more importantly, frackers were forced to rein in spending and live within their means after many investors lost faith in the companies following years of poor returns, lenders reduced their credit lines and capital markets showed little interest in funding expansive new drilling campaigns. The Wall Street Journal reported that public shale companies collectively generated a record $4.1 billion in free cash flow in the first quarter of 2021 and are poised to take in almost $15 billion for the year if prices remain higher. Instead of pumping that money back into drilling as they have historically done, large producers plan to focus on reducing debt and keeping U.S. output flat. This will allow them to return money to investors and to lure more.

These dynamics coupled with a cold winter will no doubt see utility rates at record levels. Hedging your energy now will keep Buzz Lightyear’s celebrated saying on the sidelines.

We are here to help!
Your friendly Neighborhood Energy.