Many traders had expected gas prices hovering in the low-$4 area to slow drilling — noting current prices just above the $3.50 to $4 break even estimates for some shale plays are only marginally profitable.
A combination of aggressive hedges, a strong forward price curve, lease obligations and a growing share of output from lower-cost horizontal shale-gas basins is forcing analysts to revise their assumptions about the point at which companies will shut in wells.
While current gas prices may be relatively low, the 12-month natural gas futures strip on the New York Mercantile Exchange is still near $5, with full year 2011 and 2012 prices trading at $5.35 and $5.80, respectively