Ferguson's Forecast: More Data Uncertainty at USEIA

Readers may recall the bureaucratic bumbling of the mistaken gas storage report last Thanksgiving from the U.S. Energy Information Administration (EIA). Unfortunately, additional problems have arisen at EIA making more of its published data questionable. EIA is the official source of natural gas industry data relied on by analysts. Enormous amounts of data are processed by EIA and published on its Web site at www.eia.doe.gov . The number of gas wells drilled each month is a good indicator of how hard the industry is looking for additional gas. As prices have risen, drilling activity is expected to increase as well. Baker Hughes, a major drilling supply company, publishes weekly reports of drilling rigs actively looking for gas. The weekly average in 2004 was 1,025 rigs?an increase of 18 percent over 2003. EIA reports gas wells in its Monthly Energy Review, and the January edition cited 23,620 wells completed in 2004, up from 19,722 the year before (+20 percent). Although they don?t measure the same thing, the numbers seem to agree with Baker Hughes?s. However, in the last edition, EIA made significant revisions to the 2004 data and lowered the 2004 total to 18,200 gas wells drilled, a 23 percent decrease from the previously reported number and less than the 2003 total! EIA did not revise its 2003 numbers. No notes explaining the revision could be found, and e-mail requests have not been answered. So what?s an analyst to do? It?s difficult to believe that fewer gas wells were drilled in the U.S. last year, but that?s what the current batch of EIA numbers say. Will earlier years? data also be revised? Are any of the data reliable? Until we get a coherent explanation, analysts should ignore EIA gas well data altogether. Official data that aren?t credible are perhaps worse than no data at all.

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Ferguson’s Forecast: More Data Uncertainty at USEIA

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