Market analysts may be predicting an increase in natural gas prices next year, but the amount paid per thousand cubic feet has fallen below $2 for the first time in more than ten years. As the Tribune-Review reports, the decline will likely slow down drilling – particularly in “dry gas” regions like northeast Pennsylvania.
“We made another new 10-year low, and now it’s like a death watch for this market,” said Phil Flynn, senior market analyst at PFGBest Research in Chicago. “Everybody is waiting around for the market to dive.”
At what price will producers stop drilling? Gas industry newsletter Marcellus Drilling News estimated Chesapeake Energy Corp.’s break-even point to be $1.55, based on numbers from the producer.
Chesapeake spokesman Jim Gipson declined to comment but said the overwhelming majority of the company’s rigs “are finding natural gas liquids and crude oil, which command significantly higher prices than dry natural gas.”
Fewer dry gas rigs are operating, and Oklahoma-based Chesapeake has cut its production of dry gas, typically pure methane, by 1 billion cubic feet per day, he said. Chesapeake, like many producers, has shifted its focus to shale plays rich in oil, or liquid hydrocarbons that can be processed into plastics and chemicals.