Several E&Ps made strides in third-quarter 2024 to capitalize on surging demand for natural gas and natural gas-powered electricity.

As global energy consumption incorporating cleaner, more sustainable sources, EOG Resources, Diamondback Energy and Gulfport Energy are positioning themselves to capitalize on growing trends in power generation and artificial intelligence (AI), both of which are increasing the need for reliable and scalable energy solutions.

EOG Resources has been quick to recognize the role natural gas will play in the broader energy mix. The company highlighted a trend of growing demand for natural gas in its third-quarter results, particularly in power generation.

And with the belief that demand will continue to increase as more LNG projects come online globally, the company is on track to make natural gas an even more critical component of its portfolio in the coming years.

EOG leadership remains optimistic about the outlook for gas, predicting continued growth through 2025 and beyond.

“Regarding North American natural gas, inventory levels have moved closer to the five-year average throughout the year due to a combination of producer discipline and increased demand driven primarily by power generation,” Ezra Yacob, CEO of EOG resources said during the company’s Nov. 8 earnings call. “I think many across industry policymakers, really just stakeholders, in general, see that oil and natural gas are going to play a part of the long-term energy solution.”

Gulfport Energy is positioning itself similarly, balancing oil and gas production to capture high margins. Gulfport has ramped up its development efforts in the Utica Basin, where it has implemented a managed pressure approach to improve well performance and maximize recoveries.

“When compared to Gulfport’s historical Utica dry gas well performance, the recent 2023 development program, which is being produced under our managed pressure approach yields higher cumulative recoveries per 1,000 ft of lateral after an extended production period,” John Reinhart, president and CEO of Gulfport, said during the company’s earnings call Nov. 6.

Gulfport also continues to monitor commodity prices and maintain flexibility in its operations to shift focus toward natural gas when market conditions are favorable.

“We’re sitting on some options depending on where commodity prices go, to have a lot of different levers to pull. And right now, what I would tell you is you’ve seen us lean in on the liquids area, the wet gas and the condensate area with regards to acquisitions and capital moving that way,” Reinhart said.

At Diamondback Energy, the company made investments in pipeline capacity, expanding its natural gas transportation options on pipelines such as the Whistler and Matterhorn, in order to meet domestic and international demand, which has been greatly driven by AI and its energy needs.

As AI becomes more embedded in everything from cloud computing to autonomous systems, the surge in electricity consumption from energy demands of data centers and other technology infrastructure are increasing exponentially.

Diamondback has “abundant natural gas” to feed the power-hungry AI giant, said CEO Travis Stice during the company’s earnings call, as well as over 65,000 acres on a pro forma basis.

“West Texas has a lot of land, a lot of surface. It has a lot of gas that’s being sold for less than it should. It’s got a lot of water production with that oil production that we have in the basin and I think that results in a very cheap way to develop power,” said Kaes Van’t Hof, CFO of Diamondback.

EOG and Diamondback are already positioning themselves to meet this demand, with strategic investments aimed at tapping into the power generation market. Gulfport, too, is keeping a close eye on the evolving market and the role natural gas will play as the fuel of choice for meeting the growing energy demands of AI-powered technologies.

Near-term volatility expected

The urgency to meet the energy demands needed for AI and data centers, as well as the incoming Trump administration’s favorable view of LNG, will be the biggest drivers for further investment in natural gas, according to analysts.

“We believe the power generation/AI narrative has helped attract a new subset of investors and driven the equities to outperform the commodity, while the forward curve has remained largely unchanged,” analysts at Williams, Siebert and Shank said.

Heading into the winter months, natural gas storage levels have normalized, and the overall outlook for the sector remains positive.

However, near-term volatility is expected, with curtailments, large backlogs of DUCs wells and the unpredictability of weather patterns all contributing to uncertainty in the market.

Despite these short-term challenges, analysts remain optimistic about the long-term prospects for natural gas, particularly in light of the growing role that AI and power generation will play in driving future demand.

“We remain optimistic on the long-term outlook for gas demand beginning in and increasing throughout 2025 from additional LNG projects coming online and ongoing increases in power generation,” Yacob said. “This is in line with where we’ve been for the last two years; 2025 is really going to be an inflection point for North American gas demand with LNG beginning to come online and then coming online really in 2026 and 2027.”

Comments