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The Natural Gas Rebound Will Be Fueled By Low Oil Prices

Natural gas prices continue their downward trend, currently under $2.7/MMBTu on the NYMEX, despite cold weather gripping much of the country. These prices will certainly have an impact on production. In my previous article, I discussed how this will impact shale production moving forward. In short, only small areas within the larger natural gas shale play are profitable in a sub $3/MMBTu environment; most regions' breakeven prices are over $4 or $5/MMBTu, some even higher. However, shale gas is only responsible for about 40% of domestic production, the majority still comes from mixed oil and natural gas wells:

It is therefore important to examine how this other, significant, source of natural gas will be affected by the current pricing of natural gas, as well as oil, their other source of revenue. With crude under $50/bbl and natural gas under $3/MMBTu, how many of these wells can maintain profitability?

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