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Natural Gas Prices Tough for Shale Gas Producers

by Kenneth E. DuBose on July 4, 2011

Shale gas producers are hurting from low natural gas prices and the forward curve for prices are trading around $4.50 for the remainder of the year.  Natural gas prices at this level will provide incentive for operators to continue drilling for better priced oil and NGLs.  The best remedy for low prices is low prices, so hopefully mineral owners will be getting better prices sooner than later. 

“Smaller shale gas producers have been battered by low prices for the fuel and more tough times are ahead as costs rise, likely forcing many companies to make expensive forays into oil exploration and sell assets.”"NYMEX natural gas futures through the end of the year show prices hovering around $4.50 per million British thermal units, a level some analysts believe is too low for most producers to earn profits in many U.S. fields.”

“Analysts at UBS investment research estimate that natural gas prices need to be around $5.50-$6.00 to justify tapping into the shale gas fields that likely hold massive quantities of the fuel.”

“Quarterly natural gas prices at benchmark Henry Hub have not averaged above $6 per Mcf in over two years.”

“That has put many natural gas producers in a bind. They must spend heavily to increase their output and show Wall Street that they are growing, even though the fuel’s price doesn’t pay them back enough to cover their expenditures.

“Many of the companies, such as Southwestern Energy, Petrohawk Energy, Cabot Oil & Gas and Range Resources, have been running negative cash flows, which forces them to issue new shares, take on debt, or find buyers and partners to help pay for drilling.”

Read the full news release at calgaryherald.com

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