CALGARY, Alberta, Aug 13 - Natural gas supply and demand should start coming back into balance in North America by this winter as severe cuts in drilling lead to a drop in available volumes, the head of Canada's largest contract driller by rig count said on Thursday.
Major reductions in capital spending among energy companies in response to weak gas prices are prompting steep production declines in Canada and the United States, Precision Drilling Trust (PD_u.TO) Chief Executive Kevin Neveu said.
"We think this aggressive decline rate in both Canadian and U.S. gas is catching up right now with the demand side," Neveu said at an investor conference in Denver, Colorado.
"We expect to see clear evidence of this decline early in the 2009-10 winter ... season."
Precision and its rivals have seen use of their rig fleets dwindle this year with gas prices less than half of what they were in the first nine months of 2008.
New York Mercantile gas was selling for about $3.40 per million British thermal units on Thursday, down from $8.45 a year ago.
The recession has cut industrial demand for the fuel, which has been a big factor in pushing inventories to record levels for this time of year.
"We're coming into a summer season right now where, despite Precision having strong utilization relative to a very weak industry, these utilization levels are roughly half of what they were last year," Neveu said.
The company, which operates about a quarter of Canada's onshore rigs, is using free cash to pay down debt, which climbed at the end of last year when it bought Houston-based Grey Wolf Inc to expand U.S. operations.
Precision trust units were up 13 Canadian cents, or 2 percent, at C$6.35 on the Toronto Stock Exchange.
($1=$1.09 Canadian)
Major reductions in capital spending among energy companies in response to weak gas prices are prompting steep production declines in Canada and the United States, Precision Drilling Trust (PD_u.TO) Chief Executive Kevin Neveu said.
"We think this aggressive decline rate in both Canadian and U.S. gas is catching up right now with the demand side," Neveu said at an investor conference in Denver, Colorado.
"We expect to see clear evidence of this decline early in the 2009-10 winter ... season."
Precision and its rivals have seen use of their rig fleets dwindle this year with gas prices less than half of what they were in the first nine months of 2008.
New York Mercantile gas was selling for about $3.40 per million British thermal units on Thursday, down from $8.45 a year ago.
The recession has cut industrial demand for the fuel, which has been a big factor in pushing inventories to record levels for this time of year.
"We're coming into a summer season right now where, despite Precision having strong utilization relative to a very weak industry, these utilization levels are roughly half of what they were last year," Neveu said.
The company, which operates about a quarter of Canada's onshore rigs, is using free cash to pay down debt, which climbed at the end of last year when it bought Houston-based Grey Wolf Inc to expand U.S. operations.
Precision trust units were up 13 Canadian cents, or 2 percent, at C$6.35 on the Toronto Stock Exchange.
($1=$1.09 Canadian)
