MS-Natural Gas EPs More Upside Ahead-20251103

Gas E&Ps have posted generally solid results over the past two weeks, beating consensus production and capex by 4% while cash flow came in 7% above. AR, EXE,CNX, and RRC all slightly raised 2025 production guidance, while EQT narrowed the full-year range though kept the midpoint unchanged, inclusive of strategic curtailments. EQT & EXE also trimmed capex, showcasing further efficiency gains.Overall, management teams remain constructive on US natural gas despite softness over the past several months, citing strong long-term demand from LNG exports and power generation. The opportunity to boost margins via long-term sales contracts also remains topical, with EXE announcing a new 15-year deal to a methanol plant struck at premium to NYMEX. We remain constructive looking into 2026 and retain our preference for gas over oil exposure into year-end.

US natural gas supply trends & outlook. Prompt Henry Hub have rallied ~37% over the past two weeks and recently broke back above ~$4. The move higher reflects the contract roll from Nov to Dec, an uptick in LNG feedgas flows, subdued supply,and a cold shift in weather forecasts. Based on Platts' pipeline flow data, October production has averaged ~0.9 bcf/d lower than September, with the Haynesville posting the largest declines (-1.1 bcf/d m/m). While some seasonal uptick in supply is likely as we head into winter, we continue to forecast a tightening market in the quarters ahead. Under normal weather, we see a storage deficit re-emerging this winter and growing over the course of next year, ultimately pushing prices >$5/mmbtu in 2026 (see more in Assessing Winter Scenarios).