Promised Land for Gas Drillers Turns Into Glutted Beach

Trimming production for Northeast producers can be a challenge because so many have signed agreements to pour pre-determined amounts of gas into the new pipelines. If they don't pump the fuel, they are contractually obligated to pay anyways, adding to losses.

"It's a you're damned-if-you-do and damned-if-you-don't scene if you're an Appalachian producer that has a ton of long-haul commitments on these pipelines," Deckelbaum said.

Mexico Delays

After Mexico opened its energy sector in 2014, a wave of pipelines and gas-fired power plants were announced, opening a new vein of demand for U.S. producers. But the region has been plagued by an abundance of delays and interruptions, meaning the payday for drillers has been pushed back.

Adding to the the downfall in prices, there's a lag of new liquefied natural gas exports due. Dominion Energy Inc.'s Cove Point LNG complex will be just the second gas-export facility in the continental U.S. when it kicks off in March. After that, no new terminals are set for completion until at least the end of the year.

"If you go back a few years, there was a hope that LNG exports and Mexico exports would be a boom for the industry and help spur some demand to keep the supply-demand balance tighter," Hanold said. It hasn't quite worked out that well, he said.

And with oil prices starting to steady, investors are jumping ship on the gas-heavy companies, Hanold said.

"Frankly, with oil prices being a lot stronger in the mid-60s now, I think there's more appetite to invest in the more oily names too at this point," Hanold said.

To contact the reporter on this story: Ryan Collins in Houston at

To contact the editor responsible for this story: Reg Gale at



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