Jan. 23 (Bloomberg) -- Encana Corp., Canada’s biggest natural-gas producer, rose the most in almost three years after Chesapeake Energy Corp.’s production cuts propelled gas producers higher.
Encana rose 7.4 percent to close at C$19.00 in Toronto, the most since Mar. 23, 2009. Chesapeake, the second-largest U.S. gas producer, rose 6.3 percent to $22.28 in New York.
Gas futures contracts on the New York Mercantile Exchange climbed 7.8 percent, the most in two years, after Chesapeake said it would idle drilling rigs and reduce spending in gas fields by 70 percent after prices for the fuel hit a 10-year low. Encana, Chesapeake and rivals have struggled with record- low prices for the fuel, which had fallen by half in the past year and declined the most among the Standard & Poor’s GSCI Spot Index of raw materials.
Cabot Oil & Gas Corp., Range Resources Corp., Southwestern Energy Co., EQT Corp., EXCO Resources Inc. all gained. Production of gas has soared in recent years, helped by hydraulic fracturing technology that allows drillers to tap into resources previously trapped in rock formations.
The share-price gains may be short-lived, said William Featherston, an analyst at UBS Securities in New York.
“Gas stocks remain expensive,” he wrote in a note to investors today. “With storage poised to exit the winter at a record estimated 2.1 trillion cubic feet, weak gas market fundamentals should continue to pressure stocks in the medium term.”
U.S. marketed gas production rose by 4.5 billion cubic feet, or 7.4 percent, to 65.9 billion cubic feet daily last year, according to Energy Department data. The department forecast Jan. 10 that 2012 production will rise by 1.4 billion cubic feet a day.
Encana is selling assets and looking for partners to help it cope with record-low prices. A proposed C$5.4 billion ($5.36 billion) agreement with PetroChina Co. fell apart in June.
Chesapeake’s output curtailment follows EQT’s Jan. 20 announcement that it will suspend drilling in its Huron Field in Kentucky. Southwestern Chief Executive Officer Steven Mueller said in a Jan. 5 interview his company may slow production in Arkansas’s Fayetteville Shale if prices stay low.
--Editors: Jasmina Kelemen, Charles Siler
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