The oil-to-gas price ratio has hit its highest point in six years. There’s no doubt about it, the market is certainly going through a change. Recently, the level of oil-to-gas ratio reached 30-to-1 and is expected to increase further. With this ratio, analysts are expecting the average price of gas to drop for the second consecutive year. This would lead to gas prices being the lowest that they’ve been in over 20 years.
Why is this the case? Well, the reality is that most U.S. drillers are not searching for gas. Now, drillers are seeking out more valuable oils and natural gas liquids. When drillers seek out these types of liquids and oils, they wind up finding gas inherently. Because of that, major oil corporations aren’t hurt by the dip in gas prices.
These oil-to-gas ratios are at the highest that we’ve seen since 2013. Since then, the average ratio that we’ve seen for oil-to-gas is 19-to-1. This ratio has changed drastically because of the rise in oil prices and the drop in gas prices. Ultimately, this is what has held the gas industry back.
Analysts have been looking over the market as these changes in cost happen, and they predict these numbers to dip even lower in the year to come. In fact, analysts project that the average will drop down to $2.31 billion dollars in 2020. This average is the lowest that it’s been since 1999.
How This Affects Oil Companies
The shale boom has taken analysts and the industry by complete surprise. This time of year, it’s expected that the cost of natural gas will rise simply due to the cold weather. Even though temperatures are at a low, the cost for natural gas continues to drop. With this overproduction of oil and natural gas due to hydraulic fracturing techniques, the U.S. energy industry is transformed and completely flooded.
With an overproduction at a high and prices at a low, natural-gas producers and oil companies are left hoping for the best. Many oil companies are reacting by reevaluating their budget, analyzing their assets, and finding ways to cut cost and preserve money.
While many are hopeful that this phase of the industry won’t last long, there’s no way to be sure what the future holds for the energy industry and natural-gas producers.
Reach Out to Advanced Royalty Company
The changes in the market can be alarming. Advanced Royalty Company offers unique commercial financing solutions for individuals in the industry. If you’re interested in learning more about how you can maximize the the value of your mineral rights during this time of change, reach out to Advanced Royalty Company. We would be happy to answer any questions, tell you more about our financing solutions, and figure out how to proceed in a way that you feel confident about.
Want to stay up to date on the various things going on in the energy and natural gas industry? Make sure to check out Royalty Interest Weekly where we cover the various things happening and the important factors you need to know about them.