By David Bird
Natural-gas output in the Lower 48 U.S. states dropped in March for a second straight month to the lowest level since October, government data released Thursday show.
March output averaged 71.76 billion cubic feet, down 0.4% from a revised February level. The EIA said February output was 72.02 billion cubic feet per day, down from the earlier indication of 72.32 billion cubic feet per day.
March output was 5% above the year-earlier level.
The downward revision for February means demand fell 1% in that month, more than the 0.6% decline indicated earlier. The February drop is the biggest monthly decline since a 1.9% drop in February 2011 when output was hit by a severe cold snap that disrupted some production operations.
"Texas had the largest decline at 0.15 Bcf/d or 0.7%, as several operators reported shut-ins for well maintenance," the EIA said. "Louisiana and New Mexico exhibited losses of 0.09 Bcf/d or 1.1% and 0.08 Bcf/d or 2.2%, which is partially explained by well maintenance and a few operators who cited low prices as a reason for limiting their production."
The EIA said Gulf of Mexico production increased 3.5% as production from shut-in wells resumed.
Natural gas futures prices on the New York Mercantile Exchange traded to 10-year lows in the month and were 44% below year-earlier levels.
March featured the warmest temperatures for the continental U.S. on records back to 1895, according to the National Weather Service, while 25 states east of the Rockies recorded their highest-ever January-March temperatures. Unusually warm winter cut demand for gas and caused storage levels to rise to record highs, spurring some output cuts.
Chesapeake Energy Corp., (CHK), the second-biggest gas producer in the U.S., said in late January that as a result of low prices, it was cutting output by 8% of its total flow, or 500,000 cubic feet per day. Sustained low prices could lead to a cut of a further cut of the same volume, the company said. ConocoPhillips (COP) had said it was cutting output by 100,000 cubic feet per day.
Analysts said more significant cuts weren't likely, because about one-third of U.S. gas output comes from wells that primarily produce crude oil and other liquids that are fetching high prices. Crude oil prices above $100 throughout the first quarter inspired higher production and resulted in extraction of some gas that wouldn't otherwise be profitable to produce, analysts said.
-By David Bird, Dow Jones Newswires; 212-416-2141; [email protected]