Are Optimistic Forecasts for Gas Industry Compatible With North American Problems?

Despite optimistic forecasts for the gas industry in the coming months, companies keep suffering. While consultancy Douglas-Westwood wrote that 2015 could mark a change of pace for the gas industry, Halliburton reported that North America experience an unprecedented decline in drilling activity during the first quarter.

WILL 2015 BE THE YEAR OF GAS?

‘2015 may well be remembered as the year when natural gas truly announced itself as the major energy fuel source’ Douglas-Westwood wrote on Monday, concluding that acquisitions, major capital projects and large-scale developments hint at a positive year for gas.

The consultancy mentioned the Shell’s decision to proceed with a $70 billion deal for BG Group, Chevron’s Gorgon project in Australia, and the Petronas’ operations.  

‘The big dollars to secure gas capacity are coming into sharp focus. Should the acquisition complete, Shell will have access to gas resources from Trinidad & Tobago to Tanzania. BG's Queensland Curtis LNG project could also provide a viable option to develop the major Arrow coal-seam gas development in Australia.’

HALLIBURTON BEATS EXPECTATIONS

Halliburton beat analysts’ expectations and rose as much as 4.4% on Monday, but registered a fall in revenue and operating profit in North America, which accounts for half of its activities. As a result, income from continuing operations for the first quarter of 2015 was $418 million, down 32% with respect to the same period of 2014. 

‘Primarily as a result of the recent downturn in the energy market and its corresponding impact on the company’s business outlook, Halliburton recorded approximately $823 million, after-tax, or $0.97 per diluted share, in company-wide charges during the first quarter of 2015 related to asset write-offs, inventory write-downs, impairments of intangible assets, severance costs, and other charges’ reads a note released on Monday. 

Operations in Middle East, Asia and Latin America had supported the company, but North America sent negative signals. 

‘North America experienced an unprecedented decline in drilling activity during the first quarter, which drove pricing pressure and margin compression across all product lines. First quarter revenue declined 9% and operating income declined 54%.’