Mr. Dodge: It means that a lot of companies are shifting their focus from natural gas to crude oil to take advantage of the relative price premium for oil. We see something like that just about every day. Newfield Exploration, for example, announced last month that they are increasing their oil budget 200 million and reducing gas by the same amount. The discount price for gas is that it's very easy to add natural gas supply today and will continue to be, whereas oil is much more difficult.
TWST: Bob, what's your take on that? Will this shift be temporary or something we'll see for a while?
Mr. Morris: I think it's something you're going to see for a while here. I think a lot of companies got caught a little off guard by the continued weakness in natural gas prices over the past 12 months, and most companies today wish they had more oil or liquids in their production mix. But these horizontal shale plays in the U.S. and in North America have really been a game-changer, and I think that reality is sinking in today and companies realize that the oil supply situation that we have currently is not going away any time soon. So most companies view these low natural gas prices - relative to both oil and what they've been in recent years - will persist, and they're trying to adjust their operations to generate better returns and better economics. I think the domestic natural gas price will remain well below or disconnected from oil prices here for the foreseeable future.
Tickers included in this excerpt: APA, APC, ARD, BG.L, CNQ, DNR, DVN, EOG, ME, NFX, NOV, OXY, PXD, SD, STO, XOM, XTO
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.