total energy and sustainability managementNATURAL GAS HITS DECADE LOW, NOW WHAT? Part of the Energy Game Plan series
Agenda• Natural Gas Market Highlights• Electric Market Highlights• Now What?• Summary• Q&A ...
Natural Gas 12-Month Strip$MMBtu – Historical Range 3
Weather OutlookSource: NOAA, National Weather Service Short-Term Temperature Outlook 3-Month Temperature Outlo...
Natural Gas Storage 5
U.S. Natural Gas Storage Surplus 6
Natural Gas Drilling Rigs 7
Natural Gas Production CutsChesapeake Energy• Cut dry gas production by 1.0 Bcf/day• Reducing Capital Expenditures from $3...
U.S. Natural Gas ProductionWell Above 5-year Range 9
Warm Weather, Low Natural Gas PricesHolding Down Wholesale Power Prices This Winter ...
Electric Pricing Following Gas DownRolling 12-month Strip 11
What To Do Now• Develop (or Redevelop) Strategy • Low prices and low volatility provide an opportunity to develop a ...
Determine Risk Tolerance• Questions that help drive strategy: • How much of the organization’s total operating costs are...
Develop a Purchasing Strategy• Define the goals based on risk tolerance • Portfolio approach vs. separated market approa...
Assess the Forward MarketHenry Hub Natural Gas Prices – Forward Curves 15
Assess the Forward MarketForward Prices are Trading at a Premium• Determine timeframe of purchases• Determine contract end...
Prepare for Changing Market Conditions• Get Buy-in From All Levels of the Organization • Communicate strategy to all sta...
Summary• 12 Month Forward Natural Gas curves are at a 10 year low• Lower gas prices are translating to lower electric pric...
Upcoming Webinars• Energy Management 101 – April 12• Lease Audits – May 10• Wireline Services: Are You Paying Too Much? – ...
Q&A 20
Thank you! 21
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NATURAL GAS HITS DECADE LOW, NOW WHAT?

Natural gas has hit a 10-year low, what does this mean to you and your business? Ecova invites you to view this educational webinar, where we will share an overview of the current marketing conditions and the potential impact to your business: • What are the current market drivers • Can prices continue at this pace • What impact does this have on electric prices Hosted by Ian Bowman, product manager, Energy Supply Management, Jon Lee, energy procurement manager and Blake Owen, director, Energy Supply Management at Ecova. www.ecova.com
Published on: Mar 3, 2016
Published in: Business      Technology      
Source: www.slideshare.net


Transcripts - NATURAL GAS HITS DECADE LOW, NOW WHAT?

  • 1. total energy and sustainability managementNATURAL GAS HITS DECADE LOW, NOW WHAT? Part of the Energy Game Plan series
  • 2. Agenda• Natural Gas Market Highlights• Electric Market Highlights• Now What?• Summary• Q&A 2
  • 3. Natural Gas 12-Month Strip$MMBtu – Historical Range 3
  • 4. Weather OutlookSource: NOAA, National Weather Service Short-Term Temperature Outlook 3-Month Temperature Outlook 4
  • 5. Natural Gas Storage 5
  • 6. U.S. Natural Gas Storage Surplus 6
  • 7. Natural Gas Drilling Rigs 7
  • 8. Natural Gas Production CutsChesapeake Energy• Cut dry gas production by 1.0 Bcf/day• Reducing Capital Expenditures from $3.1 Bil to $900 Million in dry gas drilling, relocating these funds to development of liquids-rich plays. This will reduce rigs to approximately 24 rigs• Chesapeake will look to reduce additional production by curtailing active wells versus shutting-in (still receive revenue)Encana Corporation• Cut 0.25 Bcf/day immediately• Future cuts 0.6 Bcf/day• Moving dry production to either oil or wet production which include natural gas liquidsOther Companies: ConocoPhillips, Occidental 8
  • 9. U.S. Natural Gas ProductionWell Above 5-year Range 9
  • 10. Warm Weather, Low Natural Gas PricesHolding Down Wholesale Power Prices This Winter 10
  • 11. Electric Pricing Following Gas DownRolling 12-month Strip 11
  • 12. What To Do Now• Develop (or Redevelop) Strategy • Low prices and low volatility provide an opportunity to develop a procurement and risk management strategy• Assess the Forward Market • Near-term prices are low • Forward markets are driving future prices higher• Prepare for Changing Market Conditions 12
  • 13. Determine Risk Tolerance• Questions that help drive strategy: • How much of the organization’s total operating costs are made up of energy expenses? • How important is it to meet or beat budgeted costs? • What is the earnings impact if energy prices increase or decrease by 20%? • How much pricing power does your organization have? • Does your organization have a history of hedging other commodities? • How far into the future should your organization make forward purchases? 13
  • 14. Develop a Purchasing Strategy• Define the goals based on risk tolerance • Portfolio approach vs. separated market approach • Budget certainty vs. prices near market • Determine product mix • Determine how many suppliers to use • Account for regional market dynamics 14
  • 15. Assess the Forward MarketHenry Hub Natural Gas Prices – Forward Curves 15
  • 16. Assess the Forward MarketForward Prices are Trading at a Premium• Determine timeframe of purchases• Determine contract end-dates, consider staggered approach 16
  • 17. Prepare for Changing Market Conditions• Get Buy-in From All Levels of the Organization • Communicate strategy to all stakeholders • Get agreement• Memorialize Strategy • Document reasoning and strategy • Distribute throughout your organization• Stick to the Plan • If price begin to rise, follow the previously-agreed upon plan 17
  • 18. Summary• 12 Month Forward Natural Gas curves are at a 10 year low• Lower gas prices are translating to lower electric prices in deregulated markets• All forward markets are contango• The glut may persist through fall of 2012, allowing 2013 to come down• Let organizational risk tolerance guide your pricing strategy 18
  • 19. Upcoming Webinars• Energy Management 101 – April 12• Lease Audits – May 10• Wireline Services: Are You Paying Too Much? – March 21• Now that the Contract is Signed – May 16 Questions: webinars@ecova.com 19
  • 20. Q&A 20
  • 21. Thank you! 21

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