I’ve blogged before (here, here, here and here)about Natural Gas, and the plummeting prices. The good news is obvious, lower Natural Gas prices mean lower gas bills and electric bills. The bad news is that we rely on the natural gas companies drilling and pumping money into our economy. We also rely on those royalty checks from already drilled wells. We have also relied on those bonus checks the companies were handing out like candy.
I doubt you will ever see another article in the newspaper quoting people cashing checks for $30,000 an acre for signing bonuses with 25% royalties. Those days are long gone, and with that, more than likely the urban drilling we have seen the last few years. Homeowners are not going to bother signing for $500, they’d rather just forgo the money and not have to put up with a well in their neighborhood.
The Chairman of Chesapeake Energywas just on CNBC and he made it clear, there is a glut of natural gas, and the only way to bring prices back up is to quit drilling. He also didn’t discount that NG could go as low as $3 in the near term. I think you are seeing the beginning of the process of these companies reducing the number of wells and will continue to see the number of wells locally drop significantly by the end of summer. Keller is in the very beginning of the process of revising it’s Gas Well Ordinance, but if I were a betting man, you won’t see but maybe one or two more wells drilled within the city limits in the future.
As I write this on January 29th, Natural Gas is trading at $4.56/MMBTU Futures Contract.