Natural gas shale drillers in US undaunted by 32% price plunge

US natural gas production is poised to reach a record for a fifth year as shale drillers boost efficiency, driving prices toward a low of more than a decade.

Output will rise 3.2% in 2015, led by gains at the Marcellus formation, the nation’s biggest shale deposit, according to the Energy Information Administration. Marcellus production will increase 2.8% through February after a 21% gain in 2014, a year when prices tumbled 32%. Producers in Pennsylvania and West Virginia have cut break-even costs by half since 2008, according to Oppenheimer & Co.

Drilling more wells at one site and extending the length of horizontal wells are among the efficiencies that have helped gas companies cope with falling prices. The EIA expects Marcellus to climb to about 20% of production in the lower 48 states from about 2% in 2007. Cabot Oil & Gas Corp, the biggest Marcellus producer, plans to increase output by at least 20% this year.

“The Marcellus has been a game changer in terms of production, reserve potential, everything,” said Fadel Gheit, a senior energy analyst for Oppenheimer & Co in New York. “They are not waiting for higher gas prices to bail them out.”

Natural gas futures fell 2.1 cents to $2.579 per million British thermal units on Friday on the New York Mercantile Exchange, the lowest settlement since June 2012. Gas has declined 81% from a high in 2008 as production from shale formations increased, touching $1.907 in April 2012, the lowest since 2002.

Break-even prices for Marcellus producers have dropped below $2 per thousand cubic feet ($1.95 per million Btu) from around $4 in 2008, Gheit said in a February 3 interview.

US gas production growth was projected to slow to 1.4% last year, the least since a decline in 2005, the EIA said in December 2013. Instead, output jumped 5.6%.

via Natural gas shale drillers in US undaunted by 32% price plun...

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