Low Permian NatGas Price Causes Some Oil Drillers to Shut In Wells
Here’s a story that may, at first glance, seem to have nothing to do with the Marcellus/Utica. Au contraire! The story of what’s happening with Permian drillers has a great deal to do with the M-U region. Although MDN frequently refers to the Haynesville Shale as the #1 competitor to the M-U because both plays target natural gas as the primary hydrocarbon, would it surprise you to learn that the Permian basin is the #2 producer of natural gas behind the M-U? And it’s catching up. Permian Basin drillers are experiencing starkly contrasting fortunes, reaping historic profits from war-driven oil price rallies while facing negative regional natural gas prices due to severe pipeline bottlenecks. To curb financial losses from associated gas, major producers like Permian Resources and Devon Energy are shutting in wells, while others resort to flaring to maintain more profitable crude production. Read More “Low Permian NatGas Price Causes Some Oil Drillers to Shut In Wells”
U.S. shale producers face limited ability to rapidly boost crude output because drilled-but-uncompleted wells, or DUCs, have fallen to record lows. DUCs can bring production online in six to nine weeks, faster and cheaper than drilling new wells, making them a key industry buffer during supply shocks. Since the U.S.-Israeli war on Iran disrupted Middle Eastern oil flows, U.S. exports and refinery runs have surged, drawing down crude inventories sharply. But years of DUC depletion have reduced shale’s flexibility. Operators are now adding rigs and completion crews, especially in the Permian, to rebuild inventories as higher future oil prices support new drilling. 
The U.S. Energy Information Administration (EIA) issued its latest monthly Short-Term Energy Outlook (STEO) yesterday. Using the official EIA dartboard, the STEO is the agency’s monthly best estimate of where energy prices and production will go over the next 12 months. There was a revision to the agency’s prediction about the spot price (at the Henry Hub) for natural gas in 2026 and 2027. For the second month in a row, the EIA has significantly lowered its predictions for the HH spot price. Last month, EIA predicted the spot price would average $3.67 per million British thermal units (MMBtus) this year, and $3.59 next year (see 
What happens on the other side of the world sometimes affects the Marcellus/Utica. So far, the Iran war has not affected prices (or demand) in the M-U for natural gas. However, if the war continues to drag on for months, it could potentially affect us by affecting the price of LNG on the world market. About one-fifth (20%) of global LNG trade depends on the Strait of Hormuz, with effectively no other way to get it out. Oil can, potentially, find other pathways out of the Persian Gulf (via overland pipelines). But such is not the case with LNG from Qatar. 
This is really big news. Yesterday, we spotted an article in the Financial Times that the Abu Dhabi National Oil Company (ADNOC), which is the state-owned oil company of the United Arab Emirates (UAE), is planning to invest “tens of billions of dollars” to build a natural gas business in the U.S., as it accelerates efforts to diversify, as the Iran war disrupts the energy industry. We’re glad we held on to that story and kept it for today, because on the heels of that story, another, bigger one broke: The UAE is resigning from OPEC and OPEC+ as of Friday, May 1. That’s huge! 
Yesterday, President Donald Trump announced the construction of a new 168,000 barrels-per-day oil refinery at the Port of Brownsville, Texas, backed by India’s Reliance Industries. Developed by startup America First Refining, this facility marks the first new U.S. refinery in half a century and is specifically designed to process American “light sweet” crude oil from shale plays. Reliance has committed to a 20-year offtake agreement, helping to reduce the U.S. trade deficit with India. While Trump emphasizes the project’s role in boosting energy production and national security amid rising gasoline prices, some industry analysts remain skeptical of the need for additional Gulf Coast capacity. 
Earlier this year, Houston-based EOG Resources acquired Encino Acquisition Partners for $5.6 billion, establishing the Utica Shale as a “third foundational play” alongside its Permian and Eagle Ford assets (see 
Bloomberg writes that shale energy’s next revolution should worry the thug dictators of OPEC. American shale drillers currently extract 10% to 15% of the oil locked in the shale layer, leaving the rest underground. However, engineers are actively trying to change this through new techniques and technologies. What if we could double the amount of oil and gas extracted? It would, once again, change the oil and gas industry worldwide. Double the production for the same investment? It’s a no-brainer. 
The U.S. Energy Information Administration (EIA) issued its latest monthly Short-Term Energy Outlook (STEO) yesterday. The STEO is the agency’s monthly best guess about where energy prices and production will head in the next 12 months. In this latest assessment, EIA dropped its estimates for the Henry Hub spot price for 2025, again, as it has for months. The agency expects the HH spot price to average $3.40 per million British thermal units (MMBtu) in 2025, $0.10 lower than last month’s forecast (and $0.30 below the prediction from three months ago). EIA also dropped its 2026 forecast, quite radically, lowering it by $0.40 to $3.90/MMBtu. Hence, our suspicion that sometimes the data crunchers haul out the breakroom dartboard to help with forecasts. 
A new report from big energy data analytics firm Enverus finds that the average breakeven price for new shale wells in the United States currently sits at $70 per barrel. That’s a problem, because the sale price for a barrel of West Texas Intermediate (WTI) crude has been firmly in the $60s for months. U.S. shale drillers can’t drill new wells if they lose money. Consequently, they’re beginning to lay down the rigs and stop new drilling. But here’s the even more troubling part of the report: Enverus predicts the breakeven price will rise to around $95 per barrel within ten years. 
According to the Financial Times (of London), the world’s biggest oil and gas companies are cutting jobs, slashing costs, and scaling back investments at the fastest pace since the coronavirus market collapse, as executives brace for a prolonged period of lower crude prices. The reason for the cuts is low oil prices, which FT says have hit the U.S. shale industry “particularly hard.” There is no denying that the price has steadily sunk to new lows each month over the past year. However, we now appear to be entrenched in the $60s, although that could change. 
We spotted a Financial Times article with an intriguing title: Opec oil ‘price war’ will halt shale boom, say US producers. The FT is the UK equivalent of our Wall Street Journal. Although it tilts a bit left, the reporting is usually pretty reliable, so we trust it (for the most part). We learned a few important things from this article. First is that the break-even price for U.S. shale drillers to make a profit is $65 per barrel. If oil remains below that point, new drilling stops. Second, one producer claimed his company would not “put any more rigs out” until prices get back to, and stabilize at, $75 per barrel. 
According to the U.S. Energy Information Administration (EIA), the United States set multiple records for energy production and exports in 2024. Of the record 103 quadrillion British thermal units (quads) of total primary energy production in the United States, a record 31 quads went to other countries. Who knew?! In 2024, the U.S. exported 55% of its domestic crude oil and natural gas plant liquids (NGPL) production either directly as crude oil or as processed petroleum products such as propane, distillate fuel oil, and motor gasoline.