“…Additional dry-gas acreage would be met with investor scorn,” says Barclays Capital’s Michael Zenker.

Maybe the ire of investors has publicly held producers shy about buying dry-gas-producing properties. Barclays Capital research analysts asked several public E&Ps’ executives if they would buy dry-gas acreage from distressed sellers today if the price is right.

“Most answered ‘no,’ while only two answered ‘yes,’” says Michael Zenker, Barclays Capital managing director, commodities research. “This suggests that some companies believe adding additional dry-gas acreage would be met with investor scorn. A watershed event would be a company applauded for selling or spinning its gas acreage to focus on oil. Some companies have positioned themselves this way, but have not completely eschewed gas.”

The small-sample survey was taken at Barclays’ recent energy and power conference where more than 170 companies—from E&P and oilfield services to midstream, coal and power generation and transmission—presented to institutional investors in five tracks during three days in New York.

“One company executive indicated that an increasing number of offers to sell gas acreage were being presented to them. In some cases, prices are as low as $1 to $1.50 per Mcf for dry-gas reserves—close to the cost of developing reserves. This suggests the business model of acquiring dry-gas acreage—drilling several wells to prove the resource, and then flipping the asset—is meeting a bearish market. Liquids-rich acreage still commands interest and a premium.”

E&Ps’ push to emphasize to investors and grow their oil and gas-liquids production began in early 2010, while emphasis leading up to late 2008 was on dry-gas-production growth from the Barnett, Fayetteville and Haynesville plays were headliners before gas prices fell into single digits and finally landed at $4.

At the recent Barclays conference, “management teams took great pains to draw attention away from the gas side of their businesses. Many companies led their presentations with catchy phrases about their new-found oil prowess: ‘back to being an oil company,’ ‘oil story with a gas option,’ ‘a pro-liquids environment,’ ‘liquids factories,’ ‘low-cost-liquids acreage advantage’ and ‘the most misunderstood asset.’ Companies that have already shifted a majority of their production or revenue to liquids trumpeted that fact.”

None of the presenting E&P executives forecasted higher gas prices soon, he adds, in contrast to suggestions in investor presentations a year ago. “In fact, this year marked the first time no company was brave enough to suggest that gas prices were ‘temporarily low.’”

Zenker concludes, “The leveraged gas-growth story has lost much of its appeal. Indeed, many producers said they would not acquire dry gas acreage even at low prices. While producers have delivered the gas production story they promised last year, investors want something else.”

–Nissa Darbonne, Editor-at-Large, Oil and Gas Investor, OilandGasInvestor.com, Oil and Gas Investor This Week, A&D Watch, A-Dcenter.com, UGcenter.com. Contact Nissa at ndarbonne@hartenergy.com.