Gas Drillers Await $4-$5 Price Levels

At a natural gas conference in Pittsburgh, natural gas exploration and production company executives said that consistent price between $4 and $5 per thousand cubic feet will re-start drilling in the country's dry gas plays. Current prices are hovering around $3.50 per thousand cubic feet, which is translating to return on investment of 19% in strictly dry-gas regions. Returns are around 47% in wet-gas areas of Pennsylvania and West Virginia.

An exception to the stated price level is the Marcellus play where current prices continue to spur rapid development, with production around 9 billion cubic feet a day compared with 2011 production of about 5 billion cubic feet a day. The region is capable of producing up to 22 billion cubic feet a day according to an analyst from Bentek Energy, a division of Platt's.

Rig counts are down 48 in the Marcellus play so far this year, but most of the rigs have been relocated to wet-gas and oil-rich plays elsewhere. Natural gas production continues to be robust, to say the least.

Shares of the United States Natural Gas Fund (NYSEMKT: UNG) are down about 0.9% today at $22.21 in a 52-week range of $14.25 to $36.16.

Shares of the Market Vectors Oil Services ETF (NYSEMKT: OIH) are up 1.8% at $40.59 in a 52-week range of $32.54 to $45.14.

Paul Ausick