Canadian natural gas producers cease production owing to low prices

Two Canadian natural gas producers announced on Monday that they had temporarily cut production owing to pipeline delays that caused western Canadian gas prices to plummet in the second part of August.

The largest gas producer in Canada, Tourmaline Oil, reduced its third-quarter production by 1.5%, or 7,500 barrels of oil equivalent per day (boepd), while its full-year production forecast remained steady at 507,000 boepd.

Kelt Exploration Ltd lowered their production expectation for the entire year of 2022 by 1,500 boepd, to about 29,000 boepd.

Last month, spot natural gas prices at the AECO hub in western Canada fell and momentarily turned negative due to maintenance on TC Energy's NGTL pipeline system, which reduced capacity and stranded gas in Alberta and at the Station 2 hub in British Columbia.

Kelt stated in a statement that the business shut off major gas quantities on particular days in both Alberta and British Columbia.

As European nations sought to replace Russian supply, the price decline coincided with a global spike in gas prices to record highs.

Friday at AECO, spot Canadian gas traded at $2,248 per million British thermal units (mmBtu), up from August's lows.

However, Kelt cautioned that AECO volatility could increase in September and October if additional NGTL system repair is done.

Tourmaline, based in Calgary, halted around 100 million cubic feet per day of existing production and pushed back the launch of a number of additional drilling pads from August to September or October. In August, the business also scheduled facility turnarounds and hedged a greater volume of gas than usual.

Michael Harvey, an analyst at RBC Capital Markets, referred to Tourmaline's action as "reshuffling output" and described Kelt's shutdown as "a smart step in light of lower temporary gas prices."

On the Toronto Stock Exchange, Tourmaline shares were recently up 2.8% at C$79.99, while Kelt shares were down 0.6% at C$6.33.