HP Helmerich and Payne Inc

The U.S. Energy Department's weekly inventory release showed a larger-than-expected drop in natural gas supplies in the midst of a brief, cold snap in the Pacific Northwest. However, this is largely seen as a one-off shot, with warmer-than-normal temperatures across most of the country restricting the commodity’s requirement for power burn. In fact, gas stocks – currently 25.4% above the 5-year average and 24.6% higher than the same period last year – are at their highest level for this time of the year, reflecting low demand amid robust onshore output.

The Weekly Natural Gas Storage Report – brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events.

The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas.

It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays like Anadarko Petroleum Corp. (APC), Chesapeake Energy (CHK), EnCana Corp. (ECA), Devon Energy Corp. (DVN), Nabors Industries (NBR), Patterson-UTI Energy (PTEN), Helmerich & Payne (HP) and Halliburton Co. (HAL).

Stockpiles held in underground storage in the lower 48 states fell by 132 billion cubic feet (Bcf) for the week ended January 27, 2012, above the guidance range (of 123–127 Bcf draw) as per the analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc (MHP).

The decrease – the tenth consecutive withdrawal of the 2011-2012 winter heating season after stocks hit an all-time high in mid-November – is well below last year’s draw of 187 Bcf and the 5-year (2007–2011) average drawdown of 186 Bcf for the reported week. The current storage level – at 2.966 trillion cubic feet (Tcf) – is up 586 Bcf (24.6%) from last year and 601 Bcf (25.4%) over the five-year average.

A supply glut has pressured natural gas prices during the past year or so, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remain robust, thereby overwhelming demand. As a matter of fact, natural gas prices have dropped approximately 50% from 2011 peak of about $5.00 per million Btu (MMBtu) in June to the current level of around $2.50 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana).

To make matters worse, mild winter weather across most of the country has curbed natural gas demand for heating, indicating a grossly oversupplied market that continues to pressure commodity prices in the backdrop of sustained strong production.

 
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