Wood Mackenzie analyst sees heightened consolidation in natural gas sector amid shale plays

Sector Snap: Analyst sees nat gas consolidation

NEW YORK — Consolidation within the shale gas industry will likely ramp up in the U.S., a Wood Mackenzie analyst said Thursday.

The emergence of shale gas as a dependable, long-term source of natural gas has put pressure on the industry to re-evaluate their strategic positions, analyst Luke Parker said in a report. He noted that independent gas companies with weak balance sheets are starting to look vulnerable to larger players.

Parker said mergers and acquisitions among U.S. shale gas producers amounted to $21 billion in the first half of the year, about one-third of the total energy exploration and production sector. Much of the activity was fostered by new technologies that have allowed companies to drill deeper and tap remote natural gas deposits in underground shale.

Exxon Mobil became the largest U.S. natural gas company when it bought XTO Energy this year. The acquisition was lauded as an aggressive move into an energy source that’s considered one of the cleaner, more abundant fossil fuels in the country.

However, natural gas prices are currently trading at less than $4 per 1,000 cubic feet on the New York Mercantile Exchange. That’s higher than the same time last year but only about half of what natural gas traded for in 2008. Natural gas prices dropped Thursday after the Energy Information Administration said inventories grew last week more than analysts expected.

In midday trading, shares of Exxon Mobil added 54 cents to $62.13, while Chesapeake Energy Corp. fell 29 cents to $22.27. Southwestern Energy Co. shares slipped 78 cents to $32.86 and Cabot Oil & Gas Corp. fell 56 cents to $29.64.