Shale producers Coterra Energy and Devon Energy on May 3 said they were evaluating new opportunities tied to LNG but warned of a “crowded” market and challenging economics.
Demand for U.S. LNG has boomed in recent months, driven by shortages in Europe and supply concerns after Russia’s invasion of Ukraine.
On May 2, pipeline operator Energy Transfer said it had signed a long-term deal to supply LNG to the Singapore unit of trading firm Gunvor while LNG developer NextDecade Corp. said it had penned an agreement with French energy company Engie SA.
U.S. shale gas producers are also eyeing opportunities to sell to international buyers. Coterra was among a group of U.S. companies that last month met delegations from Europe to discuss solutions for reducing reliance on Russian energy imports.
“We are studying the LNG markets hard,” Coterra CEO Tom Jorden told investors on an earnings call.
Coterra already moves 350 MMcf/d of LNG through the Cove Point facility in Maryland as part of a long-term deal.
The company warned that the cost of moving gas to new export facilities via long-term LNG deals, as well as competition in the marketplace, was among the challenges it faces in securing additional deals.
“Most of the new capacity that's coming on right away was spoken for years ago,” said Blake Sirgo, Coterra’s vice president of operations. “There’s a lot of demand overseas, and there’s more LNG projects in the U.S. That’s going to drive more competition in the deals for producers.”
Rival Devon Energy on May 3 said it was looking at opportunities for LNG, but had not settled on anything.
“We think there is going to be opportunity to capture a better realized price for gas longer term given LNG dynamics. So that’s something we are actively evaluating,” said CFO Jeff Ritenour.
Both companies warned that inflation and supply chain constraints were still hitting oilfield operations and could affect overall spending this year.
Coterra said oilfield annual inflation is moving toward 15%-20% and that lead times for the purchase of some oilfield parts, such as line pipe, are stretching to as long as 14 months.
Devon said it had taken steps to mitigate supply chain constraints and inflation, but warned that capital spending could come in at the high end of guidance as a result.
Oklahoma City-based Devon said it recently commenced operations at a company-owned sand mine in the Permian in Loving County, Texas, which would supply 25% of its proppant requirements in the Delaware Basin for the year.
The mine could save up to $200,000 per well, given the sharp rise in spot sand prices, executives said on May 3.
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