Natural gas-supported plays such as the Haynesville, Fayetteville and Barnett bring a sufficient internal rate of return of around 20% at a gas price of $5/MMBtu, while the Marcellus has the same rate of return at $4, analysts with Platts unit Bentek Energy said at a conference Monday.
Speaking at Benposium in Houston, Bentek analyst Ryan Smith said dry gas plays will "come back into the money" with a price between $4.50-$5/MMBtu.
On the other hand, oil-supported plays can bring a 30-40% IRR even at a $3 and $4/MMBtu gas price, depending on the play. NGL plays bring a lower IRR at gas prices of $3 and $4, yet they are profitable, Smith said.
At $3/MMBtu, dry gas production is "completely uneconomical," and will be pursued only by operators that have little to no access to liquids or oil-rich plays, Smith said.
Boosts in drilling efficiencies and lower drilling costs also contribute to reasons why gas-supported drilling will likely stay underutilized, according to Benposium presenters.
According to Rick Allen, director at Bentek, over the last six years there was a 190% growth in well efficiency.
"It took 20 days to drill a typical well in Fayetteville in 2007, while now it takes around seven days," Allen said.
On average there was a 607% increase in initial production rates per rig per year since 2007, while well completion rates remain low, Allen said.
