From Moody's Investors Services earlier this week:
North America's shale drilling revolution is now permanent and will keep natural gas selling at historically low prices for at least the next decade, Moody's Investors Service says in a new report. And while low natural gas prices will have long-term benefits for some sectors and companies, they will hurt other types of businesses, the agency says.
"A surplus of natural gas production will give North American refiners and chemical producers a long-term competitive advantage over their peers worldwide, while the shale boom also improves the credit profiles of US electric and gas utilities," says Managing Director Steven Wood, lead author of the new report, in "Chemicals, Refining and Utilities Among Sectors Seeing Biggest Benefit from Shale."
Natural gas currently sees little trade in the international marketplace, Wood says, with various difficulties in developing shale resources elsewhere keeping North America ahead of the game.
Among the many refiners set to benefit are Phillips 66, Marathon Petroleum and Valero. With lower natural gas costs, they should enjoy strong cash flows in the intermediate term from North American crude oil selling below international benchmark prices.
Makers of commodity chemicals will also enjoy lower input costs and therefore a significant cost advantage for the foreseeable future - especially companies that produce ammonia and methanol, including CF Industries, Agrium, Methanex and Rentech Nitrogen Partners.
For regulated utilities in the US, the shale revolution reduces the cost of fuel and purchased power, which represent their single largest expense. And since the utilities usually pass their fuel costs on to rate payers, lower input costs reduce customers' bills and improve their relations with regulators. Indeed, the currently more amicable environment has helped the utilities improve their cost recovery through base-rate increases, with little impact on overall customer bills.
The shale boom has also been good business for US and Canadian Class I railroads, as new pipelines struggle to keep up with oil production in new locations. The western railroads Burlington Northern and Union Pacific Railroad will see the most advantage, since they are close to the Bakken and Eagle Ford shale regions.
"Conversely, the natural gas glut from shale production poses formidable competition for the US coal industry, as power producers switch from coal to natural gas and increasingly strict environmental regulations discourage coal consumption," Wood says.
Low input costs will mean lower power prices, a significant drawback for merchant power producers, or those exposed to wholesale power prices. Only Calpine will be less affected, since it specializes in gas-fired generation.
Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.
Rig Count Interactive Map by Baker Hughes, an energy services company.
Shale Sheet Fracking, a Youngstown Vindicator blog.
The Ohio Environmental Council, a statewide eco-group based in Columbus.
Earthjustice, a national eco-group.
People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.
Concerned Citizens of Medina County, a grass-roots group.
No Frack Ohio, a Columbus-based grass-roots group.
Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.
Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.
Allegheny Front, environmental public radio for Western Pennsylvania.