I am not an optimist, but hopefully one day I will be.
With West Texas gas prices still under pressure, the timing of new natural gas pipelines from the Permian remains critical. This increased take away gives the optimist hope. However, questions remain if this will be enough to offset the increase in production. In response to the low prices, several producers have shut-in or deferred production until new infrastructure comes online. Additionally, Permian flaring continues to hit new peaks. However, if producers continue to grow unmarketed production, will Gulf Coast Express provide the needed relief to gas prices orts or just unleash a wave of new supply?
Another factor that may put pressure on pricing is expected increased production activity during the second half of 2019. Operators expect to bring 1,500 new wells online in 4Q 2019 or 25% more than they brought on in the first quarter of 2019.
This increase of production previously flared gas back on the market, and any delays in new takeaway capacity could weigh heavy on gas prices for some time. Not to forget, this increase in production activity will also impact the crude supply/demand dynamic,
Though I hope we all lean toward the optimist side, it is prudent to consider negative outcomes. This becomes very important when your asset’s value is derived from these possible outcomes. ARP and other options through Advance Royalty Company are ways you can take the negative price scenarios off the table for all or a portion of your asset, all the while retaining mineral rights ownership, ready to take advantage when the pricing cycle increases the value of your asset.