With natural gas prices falling below even operating costs in the U.S. Northeast, several E&P companies have been forced to slow or shut-in production. We believe that coming winter demand in the U.S. and exports beyond U.S. markets, along with declining gas production, will sow the seeds of natural gas and NGL price recovery and increased production. Underlying all of this activity are a growing number of pipeline completions that we see beginning this fall and continuing through 2019.

With the Northeast prices remaining below $1, Northeast production declines have affected entire U.S. production totals. In September 2016, U.S. total production was 1.5 Bcf/d lower than 2015 levels. Northeast production in September declined 1.4 Bcf/d below long-term September averages, largely driving October month-to-date declines across the U.S. of 1.7 Bcf/d.

As winter approaches, we would expect the Northeast to see modest increases in gas production as seasonal pricing improves. Additionally, several natural gas pipeline expansions are set to go into operation in fourth-quarter 2016.

Stratas Advisors predicts a jump in total U.S. gas production from 77.1 Bcf/d in 2016 to 79.9 Bcf/d production in 2017. Additionally we see year-over-year increases in natural gas production for the next decade. We forecast annual natural gas production in the United States to reach nearly 35 Tcf per year by 2020 and nearly 40 Tcf/t in 2025.

Equitrans recently brought the first fourth-quarter 2016 Northeast pipeline expansion online. The 800 MMcf/d Ohio Valley Connector was placed into service on Oct. 1. The pipeline will bring gas from Northwest Virginia into Southeastern Ohio. This available capacity adds tremendous upside to producers in the Northeast region.

Our tallies for regional pipeline capacity in the Northeast United States come to 197 Bcf/d in 2015, and we believe that incremental startups should allow capacity to reach 211 Bcf/d by the end of this year. We forecast large jumps to come, with capacities reaching 251 Bcf/d and 272.4 Bcf/d in 2017 and 2018. This will represent a 29% jump in just two years.

Beyond 2019, we recently wrote about the additions by Atlantic Coast Pipeline LLC to begin construction on its pipeline in 2017. The pipeline is schedule to come online in 2019 and will be one of two announced Appalachian projects scheduled to be complete in the same year.

With the market set to rebound, companies are poised to utilize this large increase in capacity. The producers who can take advantage of this opportunity should see great increases in revenue, which in turn should spell increases in profits as well as accelerate production.