Natural Gas Makes Up Larger Share Of U.S. Oil Producers' Revenues

Thanks to higher natural gas prices, U.S. oil producers are generating a larger share of their revenues from natural gas.

The share of natural gas in revenues jumped to 14 percent in the first quarter of 2021—the highest since at least 2018, the Energy Information Administration (EIA) says.

Excluding the integrated majors, a total of 54 listed producers primarily engaged in crude oil production have seen their revenues from natural gas at a double-digit share of total revenues so far this year, as benchmark U.S. natural gas prices jumped during the Texas Freeze and rallied at the end of the summer on the back of record U.S. liquefied natural gas (LNG) exports and flattish overall gas production in America.

As per EIA estimates, the share of natural gas in the revenues of the 54 U.S. oil producers stood at 10 percent in the second quarter of 2021.

Considering the current rally in natural gas prices around the world, including in the U.S., with Henry Hub prices at over $5 per million British thermal units (MMBtu) since mid-September, revenues from gas for the U.S. oil producers are expected to remain at high levels throughout the rest of the year, the EIA said.

The administration's analysis does not include the integrated oil majors or companies that produce natural gas as their primary business, so these trends cannot be considered as reflecting behavior in the industry as a whole, the EIA noted.

The benchmark U.S. natural gas price has doubled over the past year, and prices have rallied despite the fact that the biggest gas-producing basin, Appalachia, saw in the first half of 2021 its highest average output since natural gas production in the Marcellus and Utica shale formations started in 2008.

Overall American dry natural gas production is rising. But it's not increasing so quickly as to offset surging U.S. gas exports via pipelines and LNG cargoes, which have been setting all-time high records this year. Scorching summer heatwaves and low natural gas inventories have also driven natural gas prices higher over the past few months. 

By Tsvetana Paraskova for Oilprice.com

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