September 21, 2009 / 12:11 PM / 9 years ago

UPDATE 2-Cequence to shut in natural gas production at Gunnell

* Says plans to stop production immediately

* To see cash flow impact of about $130,000/month

* To resume production when natural gas prices recover * Sees capital spending of $15 mln for rest of 2009

* Shares fall 10 pct (Adds details, analyst comments, updates share movement)

By R. Manikandan

BANGALORE, Sept 21 (Reuters) - Canadian energy explorer Cequence Energy Ltd (CQE.TO) said it plans to shut in natural gas production from its wells in the Gunnell area of northeastern British Columbia, citing weak natural gas prices, sending its shares down 10 percent.

Cequence, which produces about 3,000 thousand standard cubic feet (mcf) of natural gas per day from the area, said the shut-in would impact cash flow by about $130,000 per month - based on the current C$3.50 per mcf gas price.

“It is probably only slightly negative, but I think it is appropriate. Gas prices are being pressured,” Robert Fitzmartyn, an analyst with FirstEnergy Capital said by phone.

Earlier this month, prices for Canadian wholesale gas fell below C$2.00 for the first time in more than seven years, as the recession and moderate weather sapped demand and storage rose to record levels. [ID:nN03503582]

Cequence, which plans to stop production from Monday, expects to resume production when natural gas prices recover.

The company, which acquired certain oil-and-gas-producing properties in August, said it expects a cash balance of $10 million after closing of the acquisitions.

Analyst Fitzmartyn said the company has a strong balance sheet and it can grow both organically as well as through acquisitions.

“This is a team that has a good track record of executing deals, so I think they can have a balanced strategy,” the analyst said.

The company expects capital spending of about $15 million for the rest of the year and is focused primarily on the Montney lands held within its subsidiary HFG Holdings Inc.

Shares of the company were down 37 Canadian cents, or 9 percent, at C$3.95 Monday afternoon on the Toronto Stock Exchange. (Additional reporting by Ashutosh Joshi in Bangalore; Editing by Ratul Ray Chaudhuri)

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