Four reasons why gas players remain disciplined as prices soar

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.