Excerpts from Geoffrey Morgan Article
National Post, Saturday January 13, 2018:
The company noted that its decision to cut spending was made “in light of the recent 40- percent decline in near-term natural gas prices.” Peyto is among the lowest-cost producers in the Western Canadian Sedimentary Basin so its moves are often emulated by smaller companies — and by some of its larger competitors.
Gee said he expected other gas producers would also reduce spending over the course of the next year because gas prices are lower than the industry’s average supply costs. “If they don’t, I think they’re exposing their balance sheets to some significant danger in the future,” he said.
The company had previously sold 100 per cent of its production into Alberta’s AECO natural gas market, which is oversupplied and hampered by pipeline constraints and outages that have at times prevented gas companies from accessing storage. Now, Peyto will work to sell 40 per cent of its production into the AECO hub, to link another 40 per cent of its production to the NYMEX price — which is a premium price over AECO — and to sell the remaining 20 per cent directly to industrial customers within Alberta.
(GMP FirstEnergy analyst Robert) Fitzmartyn said he expects Peyto would be successful in diversifying its markets and in finding industrial customers to take its natural gas, especially given that utilities will burn more gas as coal-burning power plants in Alberta are retired.