From The Wall Street Journal:
Yet fuel prices are depressed. A pair of wells in southwest Wyoming helps explain why.
This winter, Ultra Petroleum UPL 1.15% Corp., just months after emerging from bankruptcy, completed two huge wells in the state, drilling down more than two miles and then sideways for another two. Each have produced enough gas to fuel every household in Wyoming.
Ultra’s wells—whose initial flows have been among the largest ever in the U.S.—show how prospectors continue to unearth huge troves of gas. That output is offsetting increases in the fuel’s use and keeping a lid on prices.
On Wednesday, natural-gas futures for April delivery closed at $2.638 a million British thermal units, down 27% from a winter-heating season high reached in January and below break even for many drilling prospects. Many banks and analysts predict average prices will remain below $3 for years.
That is good for the homeowners, chemical makers and power plants that buy gas. But cheap gas has bedeviled drillers, many of whom are battling low prices by drilling bigger wells in search of efficiencies.
U.S. gas production has averaged 79.63 billion cubic feet a day this year, up nearly 10% from 2017’s record output, according to S&P Global Platts, which compiles pipeline data.
“Supply is casting a pall over what’s going on on the demand side of the ledger,” said Richard Redash, who leads the firm’s North American gas and power research.
Snow days in Houston and nor’easters in March have reduced gas in storage to its lowest level in three years. Chemical makers and other manufacturers are consuming record volumes. Mexico is importing more than ever. And Dominion Energy Inc.’s Cove Point export terminal in Maryland began filling tankers with liquefied natural gas this month, pushing overseas LNG shipments to new highs.