LNG

Fracking activity is ramping up across the U.S. as producers cater to booming LNG export demand and seek to pre-empt service price spikes. Early movers can reap superior margins.

Fracking in the Permian Basin has staged a record 11% annual rise in gas production, adding 2.7 bcf/d to reach 27.7 bcf/d, suppored by break-even prices as low as $61 per barrel in the Midland Basin, one of the Permian's largest oil and associated gas formations.

Rampant feedgas demand for US LNG exports is speeding up the completion of intrastate pipelines, with total capacity now reaching approximately 6.3 billion cubic feet per day (Bcf/d), according to the EIA’s updated Natural gas Pipeline Projects Tracker. About 85%, or 5.3 Bcf/d, of the additional capacity is designed to move shale gas from the Haynesville and Permian formations to the Louisiana Gulf Coast.

As of January 25, the ‘monster winter storm’ Fern has severely impacted feedgas supply for US LNG exports, with restrictions on the Creole Trail pipeline reducing flows to Sabine Pass terminal. Freeport LNG might also go offline as ice is accumulating along its feedgas corridor. 

Mitsubishi has disclosed it will buy Aethon Energy's assets in the Haynesville Shale – a move that positions the Japanese company to capitalise on burgeoning LNG exports from the US Gulf Coast. The transaction includes $5.2 billion in equity and $2.33 billion in assumed debt.

LNG is driving the bulk of US gas demand growth with Gulf Coast capacity additions pushing exports from 15.5 billion cubic feet per day towards 25 Bcf/d by 2028. Henry Hub prices indicate healthy but tightening upstream‑to‑LNG margins from Haynesville, and especially Permian associated gas.

Japan’s leading LNG importer and power generator JERA has agreed with Williams and GEP Haynesville to acquire 100% of their interest in the South Mansfield gas field in the Haynesville Shale for $1.5 billion. The upstream asset is close to LNG terminal along the US Gulf Coast.

US LNG outperforms coal in economic terms and carbon intensity when evaluated over its full lifecycle for power generation. Two-thirds of US LNG originates from Haynesville and Northeast basins, where drier gas production with less associated liquids create more favourable emission profiles, Wood Mackenzie finds.

Expand Energy, the largest gas producer in Haynesville Shale, is poised to cash in from the basin’s proximity to expanding LNG terminals. “Within a 300-mile radius of our Haynesville assets, there are more than 12 bcf/d of LNG demand under construction to be in service by 2030,” Nick Dell’Osso, CEO of Expand Energy told analysts.

Bearish shoulder-season fundamentals have made prompt gas prices at Henry Hub fall to their lowest level in five months at just above $3/MMBtu. Appalachia production stayed robust, despite seasonal maintenance, while Haynesville basin output is set to rise by 1 bcf/d year-on-year, weighing on prompt prices.

Fundamentals are largely influencing price discovery at Henry Hub, the most liquid gas trading point in the United States.

Modelling by Energy Aspects indicates that gas production in the Lower 48 States exceeded 107 bcf/d over the past weekend, with gas flows from the Appalachia Basin remaining strong despite maintenance activities and lower regional consumption. Appalachia production notched up 0.3 bcf/d and averaged 34 bcf/d, offsetting the decline in associated gas production from the Permian Basin caused by maintenance on the Permian Highway pipeline which lowered flows by 0.9 bcf/d over the past few days.

Profitable regional economics – despite Henry Hub’s recent selloff – has led to robust Appalachia production in March and April. According to US government figures, regional flows averaged 33.5 bcf/d in March and 33.9 bcf/d in April, up from 32.8 bcf/d over the previous two months. Maintenance works since early March seem to have a "minimal effect on flows," analysts noted.

Appalachia gas volumes, in fact, reached a higher baseline and higher flows. The latest surge in production comes from MarkWest Liberty Midstream and DT Midstream, as per pipeline data.

Energy Aspect’s fundamental outlook for the remainder of the shoulder season is for the year-on-year storage gap to close considerably in the second quarter of 2025, with an estimated injection of 342 bcf for April and 438 bcf for May. Rising upstream gas supply would increase Lower 48 storage levels to about 2.60 trillion cubic feet, still 284 bcf lower year-on-year.

Haynesville flows stay tepid

Gas flows from the Haynesville basin, in contrast, stay subdued as producers were cautiously slow to respond to higher price at the start of the year. As of 17 April, the Haynesville rig count stands at 31 rigs, three rigs lower year-on-year.

Energy Aspects anticipates a modest increase in rig activity by the third quarter of 2025, averaging 33 rigs, two rigs higher quarter-on-quarter. This expectation is based on recent producer guidance indicating production growth for winter 2025–26 to support weather-induced demand and LNG feedgas expansion. Core Haynesville activity in Louisiana will likely contribute most of this growth, reaching 27 rigs by December, nine rigs higher than current levels.

Upstream investment drives further growth: Comstock in its Q4-24 earnings call announced plans to spend $130–150 million on Western Haynesville infrastructure in 2025. Funding will come from their partner, Quantum Capital Solutions. Comstock said it will operate four rigs in Western Haynesville in 2025 on average and intends to drill 20 further wells in the near future.

Aethon Energy, another major producer in Western Haynesville, earlier this year announced it would need Henry Hub prices to reach $5/MMBtu to incentivise investment to grow output. Analysts estimate the company’s rig count in Texas Haynesville will reach seven rigs by December, six rigs below current levels.

LNG export exposure

Latest US government data indicates Western Haynesville production reached 0.71 bcf/d in February, with Comstock averaging 0.32 bcf/d (45% of sub-basin production). Currently, Haynesville's production averages 11.5 bcf/d month-to-date, 0.1 bcf/d lower month-on-month.

“Yet, incremental production from new activity remains elusive due to producer discipline,” analysts commented.

Expand Energy announced estimates that its Q1 25 Haynesville production will average 2.6 bcf/d, some 0.2 bcf/d higher quarter-on-quarter, while operating seven regional rigs, one less than the first quarter. The company’s Haynesville portfolio has approximately 2 bcf/d of exposure to LNG export facilities, with an additional 2.5 bcf/d in deliverability expected by the end of 2025, including 1 bcf/d of Gillis volumes that will come to market via the new NG3 pipeline.