Aethon president: Natural gas needs to top $5 to spur Haynesville investment

Jan. 8, 2025  Geert De Lombaerde  www.ogj.com

Executives speaking at a Goldman Sachs conference said there’s no price incentive yet to lift production.

Gordon Huddleston, president and partner at Aethon Energy Management LLC, told attendees of the Goldman Sachs Energy, Cleantech & Utilities Conference that firms such as Aethon have little incentive to bring more product to market this year after they curtailed production last year in the face of weakening prices and a glut of supply. But he and other executives said the completion of several LNG export plants should begin to lift prices.

Still, Huddleston added, it will take a lot of upward movement to get companies such as Dallas-based Aethon—which produces about 3 billion cu ft per day (bcfd) and has most of its assets in the Haynesville—to commit to new development.

“You’re talking about a lot of potential demand coming on and we know that’s going to necessitate higher pricing,” Huddleston said as part of a panel discussion on the natural gas market. “It probably starts with a 5 [USD] to bring significant development on.”

The Henry Hub price of natural gas for February delivery closed trading Jan. 7 around $3.45/MMbtu.

Nick Dell’Osso, president and chief executive officer of Expand Energy Corp., echoed Huddleston’s assessment of what it will take to reignite capex in the Haynesville region. Around $3.50/MMbtu, Dell’Osso said, marginal production in the area begins to break even—but prices need to climb “materially higher” to justify new volumes.

“The curve is telling you it’s really not concerned about growth much beyond where we are today,” Dell’Osso said.

Last year, Expand executives (then still operating as Chesapeake Energy Corp. before buying Southwestern Energy Co.) helped set the tone among companies by pulling back on spending and deferring the turning in line of dozens of wells (OGJ Online, Feb. 21, 2024). They added to those cutbacks in the spring with the aims of managing production declines and preserving the flexibility to bring back volume when wanted or needed to offset lost production elsewhere (OGJ Online, May 1, 2024).

Dell’Osso told the Goldman audience his team is now following that plan and sticking to its target of leveling out Expand’s production around 7 bcfed. The current cold snap gripping much of the country these days won’t affect that, he added.

“Nothing has changed for us. The strip is largely in line with where we saw it to be at the time that we made [that] decision,” he said.

Contributing to longer-term investment discipline is uncertainty about the interplay in coming years between the US LNG export plants that have come online (see sidebar) along with others being built, broader domestic gas demand and corresponding international activity.

Dell’Osso said the market is likely to remain tight for another two and a half years but added that that timeframe isn’t enough for Expand to commit to a host of new wells in the near future.

“You don’t want to grow for a season,” he said. “You want to grow for something that is durable over several years.”