“For new drilling, the Marcellus [Shale] is the only basin where it makes sense to drill at $2.50[/Mcf] from a return perspective.”
The head of Anadarko Petroleum believes that the current window for bargain-basement natural gas prices is closing, as producers will decide they can’t economically keep drilling dry gas wells at current price levels.
Anadarko Chairman and CEO James Hackett said in Houston Wednesday that the current price deck below $3/MMBtu for natural gas will be short-lived.
“My view is that it will go up from here, based on reaction from companies cutting back on their drilling, but it won’t go to a level where people will be discouraged from using gas,” he told reporters on the sidelines of the North American Energy Resources Summit at Rice University. “For new drilling, the Marcellus [Shale] is the only basin where it makes sense to drill at $2.50[/Mcf] from a return perspective,” he said.
Hackett cited a study, released in 2011 by ICF International, which predicted that gas would trade in a $5/MMBtu to $7/MMBtu price range in the next seven to 10 years.
“The belief was that when we got past this period of very soft prices, we would get into a $5- to $7-per-dekatherm range,” he said.
On a Btu-equivalent basis, that range averages out to about the equivalent of $35/bbl of oil at the wellhead, which would still give gas a price advantage over oil for use in the transportation sector as well as in the petrochemical industry, Hackett said.
“My view is that it’s a very reasonable price range for a long period of time. It’s just depressed at below what is a reasonable level today,” he said…