HOUSTON—Two prominent U.S. shale producers diverged on the role and price outlook for natural gas while speaking at CERAWeek by IHS Markit on March 8.

Jeff Ventura, chairman, president and CEO of Range Resources Corp. (NYSE: RRC), was quite bullish on gas for the long term, citing great U.S. reserves, growing demand, but a lamentably low gas price.

Al Walker, chairman, president and CEO of Anadarko Petroleum Corp. (NYSE: APC), was not as sanguine, saying he thinks gas prices will not be high enough to attract the company’s drillbits.

First, Ventura reminded attendees just how big reserves are in the Marcellus and Utica shales, especially if one drills in the core areas. But, he said, the current gas price of around $3 per thousand cubic foot (Mcf) is too low. He said projections of growth in gas demand, offset by declines and fewer rigs working, point to gas shortages and price spikes in the future.

Ventura sees U.S. demand rising by 16 Bcf/d by 2020 and another 15 Bcf/d by 2025. The U.S. base decline rate, however, is about 7 to 9 Bcf/d, per year. He also cited a study by IHS Markit that indicated the cores in most shale plays will be exhausted in 10 years. However, gas demand is projected to rise before then.

“In my opinion, the futures price of natural gas is not capturing this,” he said. “A key is that you have limited availability to the core areas with the best economics. A lot of oil and gas remains, but not all acreage is created equal—only some of it is core. Put another way, 80% to 95% of most plays are not core, so the economics vary widely.

“A higher price will be required to incentivize more gas drilling, especially as we move beyond the core and demand goes up. The good news is we have 100 years of natural gas reserves in this country,” he added.

Range has doubled down on natural gas, boosting reserves by virtue of its $4.4 billion acquisition of Memorial Resource Development Corp.’s Terryville complex in northern Louisiana, which augments its dominant position in Appalachia. Range produced 1.85 Bcf/d in fourth-quarter 2016.

Anadarko Petroleum, meanwhile, has gradually sold off many of its natural gas assets in favor of more domestic oil and NGL plays onshore and offshore. It has exited the Marcellus and gas fields in East Texas.


Range Resources To Expand Beyond Marcellus Shale Through Merger

Anadarko Petroleum’s $2.3 Billion Deal With Sanchez Tilts Eagle Ford Balance

Anadarko Adds To Bounty With Marcellus Exit

“We’ve redirected more of our capital spending to the U.S., but unlike Jeff, we’ve sold most of our gas assets in favor of the D-J Basin, the Delaware and the Gulf of Mexico,” Walker said.

“We looked at our portfolio and saw that it would take $6 [dry) gas to give us the same margin we are getting in the Delaware and D-J, so we sold. We believe gas prices are range-bound and we believe as production increases, it will cap gas prices,” he said.

“I may be right or wrong, or Al may be right or wrong,” Ventura said to laughter.

“One thing’s for sure, one of us will be wrong,” Walker countered.

Given the high projections for increased oil production out of the Delaware, there will be more associated gas production as well, Walker said. “I think the constraints will be people and access to capital, not gas prices.”

Ventura said there will be less gas drilling and no massive outspend of cash flow if gas prices stay around $3. ”I think activity is driven by price,” he said.

Leslie Haines can be reached at lhaines@hartenergy.com.