CHICAGO, March 3, 2014—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, has published its latest report exploring the future of U.S. natural gas production, including the key growth drivers, a bottom-up forecast through 2015, the intersection of supply and demand, and investment considerations for equity shareholders.
“The emergence of the Marcellus Shale—the vast gas-bearing rock formation in the northeastern United States—is a game-changer for the U.S. energy industry. We think the United States is likely to become a major exporter of natural gas over the next few years, which couldn’t have been possible before the rise of shale gas and the Marcellus Shale,” Mark Hanson, Morningstar’s strategist for energy equity research, said. “Our latest research investigates why gas production continues to increase despite a drop in the number of drilling rigs and includes a framework for evaluating natural gas prices.”
Key takeaways of the latest Morningstar Energy Observer, “Shale Shock—How the Marcellus Shale Transformed the Domestic Natural Gas Landscape and What It Means for Supply in the Years Ahead,” include:
• Morningstar analysts predict the Marcellus Shale will be the biggest driver of U.S. gas production over the next few years. Morningstar projects U.S. natural gas production will increase by approximately 2 percent every year through 2015, by which time the Marcellus Shale will account for close to one-fourth of domestic volumes.
• Shale gas has been the biggest driver of U.S. production over the past several years, helping boost volumes by 25 percent from 2007 to 2013, despite declines in conventional areas like the San Juan Basin in the southwestern United States and the Gulf of Mexico. Without production from the Marcellus Shale, Morningstar analysts find it probable that U.S. natural gas production would have peaked in late 2011 or early 2012.
• If demand keeps pace with supply over the next few years as Morningstar analysts expect, natural gas prices should normalize between $5 and $6 per thousand cubic feet of natural gas (Mcf).
• In the upstream, or exploration and production, space, Morningstar analysts think Ultra Petroleum, Tourmaline Oil, and Canadian Natural Resources can benefit from higher activity and higher gas prices. Within the midstream, or processing and transporting, sector, Morningstar analysts see that Spectra Energy Partners and Energy Transfer Partners stand to benefit.
• Among services companies, Morningstar believes Halliburton, and to slightly lesser degree Schlumberger, are positioned to benefit from continued gas production in the United States.
• If rising natural gas prices lift power prices, several firms stand to benefit in the utilities sector, most notably Exelon, Calpine, and FirstEnergy, according to Morningstar.
To access the February 2014 Energy Observer, please visit http://mscomm.morningstar.com/february-observer. All of Morningstar’s Observer publications are published in Morningstar DirectSM, its global investment analysis platform for institutional investors; and Morningstar Select, the company’s institutional equity research portal. More information about Morningstar’s equity research offerings is available at http://corporate.morningstar.com/us/asp/subject.aspx?xmlfile=32.xml.
Morningstar’s Observer series features in-depth sector research reports that harness Morningstar’s focus on a long-term investment horizon and economic moats—or sustainable competitive advantages—to analyze complex investment trends across sectors. The company publishes editions of its Observer series regularly throughout the year, focusing on various topics across sectors, including basic materials, consumer goods and services, energy, financial services, healthcare, industrials, and technology.
Morningstar launched its equity research in 1998 and now has about 120 global equity and corporate credit analysts who provide qualitative analyst coverage of approximately 1,500 companies. Morningstar also provides quantitative ratings and reports for more than 30,000 companies globally.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 446,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 10 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and had approximately $159 billion in assets under advisement and management as of Dec. 31, 2013. The company has operations in 27 countries.
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