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In a swamped market, companies that historically produce natural gas are switching commodities.

They’re drilling for crude oil.

Since a glut of natural gas from the eastern and southern United States has overwhelmed Wyoming’s strong hold on the market, producers aren’t pretending like it’s 2006. Instead of dreaming for $7 per million BTUs, or British thermal units, companies in the industry are sitting on stockpiles of natural gas and going to where the money is: crude.

The impetus to switch from gas to crude is simple: It gives producers a quicker and larger return on their investments. The price gap between crude oil and natural gas is at historic levels, said Tim Considine, a professor of economics at the University of Wyoming’s School of Energy Resources. The two commodities were essentially selling at the same BTU price equivalent in 2007, he said. Today it’s a different story.

“It’s a big spread, and it’s standing out like a sore thumb,” Considine said.

With the Wyoming price of natural gas down more than 50 percent since 2008, the dramatic flux is leaving many active producers in Wyoming shell-shocked. The combination of low prices and high overhead costs makes it difficult for companies to turn a profit, said Bruce Hinchey, executive director of the Petroleum Association of Wyoming.

The cost of production isn’t all to blame. Transportation costs are also putting a hurt on producers. The cost of shipping gas via pipelines is nearly half of the commodity’s value per million BTUs, Hinchey said.

“You’re not getting a lot of money for your gas in the end right now,” Hinchey said.

Devon Energy began to switch its drilling focus from natural gas to crude when the descent in price began in late 2008, said Chip Minty, spokesman for Devon Energy.

“Most of our capital right now is being spent on areas that are rich in oil,” he said.

The company has seen a 20 percent jump in its production of crude and a 1.5 percent decline in its production of natural gas in the past year.

Devon isn’t focused on drilling new gas wells, but it’s not giving up on natural gas either, Minty said.

“The wells that are producing will continue to produce,” he said.

Even behemoth natural gas driller Encana has seen a 5 percent drop in its natural gas drilling operations since 2009, said Doug Hock, the company’s public relations director. Once known as a single-play drilling company, Encana has sold some of its assets to come up with the capital to fund new drilling ventures in the past three years, he said

To balance its portfolio, the company invested in crude and other liquid commodities such as propane and methane in the past three years, Hock said. About 85 percent of its operations are still natural gas-based, but it intends to devote 80 percent of its capital to crude and other liquids in 2013.

“They call it the shale gale,” Hock said. “We are victims of our own success because we’ve been good at finding new sources.”

Exxon Mobil Corp. has had its fair share of problems with the natural gas industry. It bought Houston-based XTO for $41 billion in 2009, placing a big bet on the natural gas industry. The acquisition gave Exxon some of XTO’s natural gas fields in Wyoming. The purchase hasn’t been profitable for the world’s largest publicly traded company, according to CEO Rex W. Tillerson.

He didn’t beat around the bush when talking about the natural gas industry’s plight during an appearance at the Council on Foreign Relations in July.

“We are all losing our shirts today,” Tillerson said. “We’re making no money. It’s all in the red.”

Chesapeake Energy’s oil production grew by 69 percent in 2012. But that same year it purged facilities that gather, process and market natural gas. According to a company investor report, natural gas accounted for 77 percent of the company’s fourth-quarter production in 2012, which was down from 82 percent one year prior.

There’s a nagging question pestering both producers and policymakers in Wyoming: When will the price of natural gas bounce back?

For state lawmakers, the price of natural gas weighs heavily on the state’s budget. During the recent 62nd Legislature, natural gas futures drove the debates on budget cuts for state agencies and a state gasoline and diesel tax hike.

The problem for the state is predicting what prices will be in two years or a decade from now. Rep. Tom Lockhart, R-Casper, said he would be a “rich man” if he had the foresight to predict future prices.

For the next year, prices in the natural gas industry will be the same, Lockhart said.

“But nobody is smart enough to look a few years out,” he said.

Some in the state are more optimistic. By January, prices could rise into the $4 per million BTU range, said Bill Mai, co-chairman of the Wyoming Economic Analysis Division. With the price of natural gas currently lagging in the low $3 range, such a jump would be a boon to the state’s coffers. The severance tax and federal mineral royalty revenues coming from natural gas producers that help to fund state government are down by more than $4 billion from 2008.

Mai estimated that a jump up to the $4 range would give the state an extra $300 million by January 2015. Mai said he’s more hopeful than many in the state. But he’s not convinced of the numbers. A multitude of factors could come together and drive prices lower or higher, he said.

“Everyone has an opinion,” said Devon’s Minty. “We aren’t giving up on gas in the long-term. But right now the drilling we do is focused on developing our oil assets and exploring new areas.”

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