Southwestern Energy Company (SWN), Ultra Petroleum Corp. (UPL), EXCO Resources Inc (XCO): Can Natural Gas Companies Keep up With Growing Demand?

EXCO Resources Inc (NYSE:XCO) has also seen meaningful improvements in drilling days, reporting that it drilled its most recent wells in about 34 days, down from 45-60 days a few years ago. These and other efficiency gains helped the Dallas-based company reduce its well costs by about 20% from the end of 2011, with current costs in its core DeSoto area down to about $7.8 million-$8 million.

Finally, Chesapeake Energy Corporation (NYSE:CHK), the nation’s second-largest gas producer, has also reported impressive efficiency gains, though it is not actively drilling for natural gas. In its Eagle Ford operations, which are the main driver of its oil production growth, the Oklahoma City-based company saw a 28% year-over-year decline in spud-to-spud cycle times, which fell from 25 days to just 18 days in the first quarter.

The bottom line
As you can see, companies across the board are reporting meaningful improvements in efficiency through improved drilling methods, such as drilling multiple wells from one pad, better water management, infrastructure improvements, and other efficiencies. These savings are translating into reduced drilling times and lower well costs, helping deliver strong bottom-line growth.

Indeed, efficiency improvements can help explain much of the large disconnection between the natural-gas-directed rig count, which was down about 56% from its 2012 peak of 811 as of the most recent data, and U.S. natural gas production, which continues to hover near record levels. This seems to suggest that, if demand were to spike at some point, energy producers should be able to redeploy their rigs toward gassy plays with relative ease.

The article Can Natural Gas Companies Keep up With Growing Demand? originally appeared on Fool.com and is written by Arjun Sreekumar.

Fool contributor Arjun Sreekumar owns shares of Chesapeake Energy and Ultra Petroleum. The Motley Fool recommends Ultra Petroleum. The Motley Fool owns shares of Ultra Petroleum and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, Short Jan 2014 $15 Puts on Chesapeake Energy, Long Jan 2014 $30 Calls on Ultra Petroleum, Long Jan 2014 $40 Calls on Ultra Petroleum, and Long Jan 2014 $50 Calls on Ultra Petroleum.

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