Wednesday, October 6, 2010

If the price of natural gas

is too low to substain production, WHY the hurry in the Barnett Shale?

The land has been grabbed, the air and water polluted, HOW much was your royalty check this month?

Read about it in the Fort Worth Star-Telegram.

By continuing to drill despite weak prices, "we've been ignoring the free market," Nichols said. But today's depressed prices represent "the free market ... sending us a very powerful signal" that there is an oversupply of gas, he said.

Drilling activity has been sustained by companies needing to drill wells to retain leases, by hedging contracts that have enabled energy companies to receive prices for their gas that are well above market levels, by joint-venture agreements mandating certain levels of drilling and by Wall Street's willingness to pump money into the industry, Nichols said.

But drilling in a low-price environment inevitably will decline after energy companies have either drilled wells to hold leases or allowed them to lapse, as the beneficial hedging contracts expire and as Wall Street grows "weary of funding undisciplined growth" through companies' excessive drilling, Nichols said at the three-day event running through Thursday at the Fort Worth Convention Center.

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