We are making several changes to our natural-gas price assumptions that will positively affect our fair value estimates for numerous companies in the natural-gas industry. First, we are raising our midcycle price assumption for the NYMEX Henry Hub benchmark to $5.67 per thousand cubic feet (mcf) from $4. Although natural-gas prices have drifted lower recently due to an abnormally warm winter, we based our midcycle price decision on several longer-term trends. Unit costs have been on the rise over the past two years, with the higher-cost, marginal producers experiencing the most marked increases in costs. We don't see this trend changing over the next few years, as firms are paying top dollar to acquire new properties and day rates for rigs are still well above normal. Further, as LNG becomes a larger contributor to supply over the next decade, we expect that it will support our midcycle price. Although LNG could displace high-cost domestic producers, we think that it should improve the reliability of supply--helping to stabilize gas prices near our midcycle price, rather than creating a glut of low-cost gas.Demand for natural gas has not fallen considerably despite steeper prices in recent years. Although we think industrial consumers could continue to disappear if high and volatile prices persist, the large installed base of gas-fired power plants and home heating customers should help shape a floor for gas prices over the next decade. Second, we have reduced our long-term inflation rate for natural gas to 3.6% from 6%. The new 3.6% figure matches our inflation rate for oil and reflects our opinion that prices for oil and gas should hover more closely to energy equivalence (roughly 6,000 cubic feet of natural gas per barrel of oil) over the next 10 years than they have in the past. In fact, on an energy-equivalence basis, our new midcycle natural-gas price (adjusted for inflation) equals our oil-price assumption in the third year of our forecast (2008). Third, we have incorporated seasonality adjustments to improve our near-term accuracy. Between our methodology changes and new price assumptions, we now expect benchmark natural-gas prices to average near $8 per mcf in 2006, $6.80 in 2007, and $6.20 in 2008. After 2008, we assume prices will grow at our projected long-term inflation rate of 3.6%. Despite our higher assumptions, we still consider recent prices exceeding $10 per mcf extremely high and ultimately unsustainable. Increases in our fair value estimates will vary. For firms concentrating on oil or those pursuing an integrated strategy, we expect fairly small changes. However, for smaller, independent firms focusing on North American natural-gas production, we expect more significant adjustments to our fair value estimates. Please refer to the valuation section of each company's Analyst Report to view how our fair value estimates are changing on a firm-by-firm basis.
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El Paso Corporation, Pogo Producing Company, Houston Exploration, Western Gas Resources, Energy Partners, Ltd., Bill Barrett Corporation, McMoRan Exploration Co., Devon Energy Corporation, Anadarko Petroleum Corp., Whiting Petroleum Corporation, Southwestern Energy Company, Quicksilver Resources, Inc., Chesapeake Energy Corp., EQT Corp., Kerr-McGee, Questar Corporation, XTO Energy, Inc., Encore Acquisition Company, Cabot Oil & Gas Corporation, Williams Companies, Inc., EOG Resources, Cimarex Energy Company, EnCana Corporation, Ultra Petroleum Corporation, Primewest Energy Trust, BG Group PLC
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El Paso Corporation Full Analyst Report
Analyst Notes
10-20-09 | 4:24PM El Paso Pipeline Raises Distribution
07-23-09 | 9:56AM El Paso Maintains Pipeline Plans
04-23-09 | 1:09PM 2009 NYC IPAA Conference Notes
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Pogo Producing Company Full Analyst Report
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Houston Exploration Full Analyst Report
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Western Gas Resources Full Analyst Report
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Energy Partners, Ltd. Full Analyst Report
Analyst Notes
06-12-09 | 2:47PM Dropping Coverage of Energy Partners
04-01-09 | 3:15PM Energy Partners at the End of Its Rope
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Bill Barrett Corporation Full Analyst Report
Analyst Notes
11-03-09 | 10:09AM Bill Barrett Posts 3Q
08-04-09 | 10:51AM Bill Barrett Turns In 2Q Results
05-05-09 | 4:35PM Bill Barrett Optimistic on Rockies
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McMoRan Exploration Co. Full Analyst Report
Analyst Notes
10-20-09 | 9:17AM McMoRan's Drilling Continues in 3Q
07-17-09 | 8:50AM McMoRan's Challenges Remain in 2Q
04-23-09 | 1:09PM 2009 NYC IPAA Conference Notes
04-22-09 | 10:37AM McMoRan's 1Q Signals Offshore Risks
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Devon Energy Corporation Full Analyst Report
Analyst Notes
11-16-09 | 8:51AM Devon Repositions
11-04-09 | 11:14AM Devon Sees Declines in 3Q
08-05-09 | 9:15AM Devon Announces 2Q Results
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Anadarko Petroleum Corp. Full Analyst Report
Analyst Notes
11-03-09 | 9:02AM Anadarko Reports 3Q
08-04-09 | 9:23AM Anadarko Reports 2Q Results
05-07-09 | 1:08PM Anadarko Announces 1Q Results
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Whiting Petroleum Corporation Full Analyst Report
Analyst Notes
10-29-09 | 9:16AM Whiting Posts 3Q Results
07-30-09 | 10:13AM Whiting Raises 2009 Capital Budget
04-30-09 | 1:42PM Whiting Sees Improving Bakken Returns
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Southwestern Energy Company Full Analyst Report
Analyst Notes
10-30-09 | 8:37AM Southwestern's Growth Resumes in 4Q
08-04-09 | 4:23PM Southwestern Drilling Gains Persist
05-22-09 | 4:36PM Lower Uncertainty for Southwestern Energy
05-01-09 | 10:28AM Southwestern Energy Shines Again
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Quicksilver Resources, Inc. Full Analyst Report
Analyst Notes
11-09-09 | 8:52AM Quicksilver's 3Q Production Lags
11-04-09 | 10:36AM Quicksilver's Production Outstrips Estimates
09-22-09 | 9:26AM Great Start for Quicksilver Resources
08-10-09 | 8:53AM Quicksilver Resources Reports 2Q
05-20-09 | 9:23AM Reducing Quicksilver's Uncertainty
05-18-09 | 9:12AM Quicksilver Announces Alliance with Eni
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Chesapeake Energy Corp. Full Analyst Report
Analyst Notes
11-20-09 | 3:17PM Chesapeake Energy under Review
11-03-09 | 8:56AM Chesapeake Announces 3Q Results
08-04-09 | 9:02AM Chesapeake Turns In 2Q Results
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EQT Corp. Full Analyst Report
Analyst Notes
07-30-09 | 3:00PM EQT Adds Projects in 2Q
06-10-09 | 2:06PM Lower Uncertainty for Some E&Ps
05-04-09 | 10:04AM EQT Stays on Appalachia Growth Path
04-23-09 | 1:09PM 2009 NYC IPAA Conference Notes
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Kerr-McGee Full Analyst Report
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Questar Corporation Full Analyst Report
Analyst Notes
07-29-09 | 4:57PM Questar's 2Q Stays on Track
06-10-09 | 2:06PM Lower Uncertainty for Some E&Ps
04-23-09 | 1:09PM 2009 NYC IPAA Conference Notes
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XTO Energy, Inc. Full Analyst Report
Analyst Notes
11-04-09 | 9:25AM XTO Tops Our 3Q Production Forecast
08-05-09 | 9:11AM XTO's 2Q Results Impress
05-06-09 | 2:50PM XTO Announces First-Quarter Results
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Encore Acquisition Company Full Analyst Report
Analyst Notes
11-02-09 | 3:05PM Denbury Faces Merger Challenges
11-02-09 | 9:31AM Denbury to Acquire Encore
10-28-09 | 12:32PM Encore Acquisition Announces 3Q Results
06-29-09 | 11:59AM Encore Acquires EXCO Properties
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Cabot Oil & Gas Corporation Full Analyst Report
Analyst Notes
10-27-09 | 4:17PM Cabot Oil Ramps Up 2010 Drilling
07-27-09 | 4:34PM More Drilling Gains at Cabot Oil
05-22-09 | 3:58PM Lower Uncertainty for Cabot Oil
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Williams Companies, Inc. Full Analyst Report
Analyst Notes
08-07-09 | 2:35PM Williams' Projects Progress in 2Q
05-06-09 | 4:12PM Venezuela Threatens Nationalization
04-23-09 | 1:09PM 2009 NYC IPAA Conference Notes
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EOG Resources Full Analyst Report
Analyst Notes
08-07-09 | 9:00AM EOG Announces 2Q Results
05-05-09 | 3:25PM EOG Announces 1Q Results
04-23-09 | 1:15PM 2009 NYC IPAA Conference Notes
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Cimarex Energy Company Full Analyst Report
Analyst Notes
10-22-09 | 9:30AM Cimarex Gives 3Q Operations Update
08-07-09 | 8:56AM Cimarex Reports 2Q Results
07-31-09 | 3:36PM 2Q Operational Update from Cimarex
05-08-09 | 11:27AM Update on Cimarex
04-23-09 | 1:15PM 2009 NYC IPAA Conference Notes
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EnCana Corporation Full Analyst Report
Analyst Notes
11-12-09 | 9:18AM EnCana Provides 2010 Estimates
09-11-09 | 9:12AM EnCana to Split in Two
07-23-09 | 4:11PM EnCana Optimistic on Resource Plays
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Ultra Petroleum Corporation Full Analyst Report
Analyst Notes
10-30-09 | 9:20AM Ultra's 3Q Earnings Impress
08-04-09 | 9:19AM Plenty to Like in Ultra's 2Q Earnings
05-14-09 | 9:01AM Lowering Ultra's Uncertainty Rating
05-06-09 | 3:28PM Ultra Reports First-Quarter Results
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Primewest Energy Trust Full Analyst Report
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BG Group PLC Full Analyst Report
Analyst Notes
11-05-09 | 2:27PM BG Group Reports 3Q
07-31-09 | 2:17PM BG Group Reports First-Half Earnings
06-30-09 | 2:36PM EXCO Enters Joint Venture with BG
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