Insight
Four reasons why gas players remain disciplined as prices soar
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
In September, Henry Hub prices jumped nearly 30% to well over $5/mmbtu and are more than double what we saw earlier this year. Back when prices were this high seven years ago, production grew lockstep with the market runup. But this time is different. There were just shy of 90 horizontal gas rigs deployed at the beginning of October, having only increased 14% since the beginning of 2021. Oil players didn’t respond to higher prices this year and we expect the same inelastic reaction from gas-focused companies, too. In contrast to oil E&Ps, gas operators must consider a lack of spare takeaway capacity. Basis differentials in gas assets can be a greater percentage of netbacks too, leading to more complex responses to price signals. Nevertheless, the lack of activity builds seen in major gas plays like the Marcellus and Utica this year is indeed different from previous Henry Hub pricing cycles.
Table of contents
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Executive summary
- What’s been happening in the major gas plays?
- 1. Gas producers aren’t necessarily receiving the prices we see today
- 2. Elevated gearing ratios dictate capital allocation
- 3. Private E&Ps no longer dominate Haynesville production
- 4. DUCs won't be around forever to compensate for low rig counts
Tables and charts
This report includes the following images and tables:
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Northeast price to rig activityMarcellus monthly rig additionsHaynesville gas production and rigsMarcellus spuds and completions
What's included
This report contains:
