Analysis: Cash-Rich Shale Drillers Boost Output, Cap Prices

Wednesday, August 03, 2011

(Reuters) - Until recently, the nascent U.S. shale gas industry faced a major constraint on its growth, one that was bigger than environmental risk, more vexing than technology, and more challenging than the scrum for new acreage: capital.

After some $40 billion of foreign investment in the sector in the last two years, including BHP Billiton's record $15.1 billion plunge last month, that limitation is no longer a factor, analysts say. And as a result, production may grow even faster than previously expected, putting an ever firmer cap on prices.

But some analysts say even that may now be too optimistic, if producers eager to start generating cash on their investments push aggressively forward.

"Really what (BHP's acquisition) does is it probably puts an acceleration on Petrohawk's plans," said Tom Sherman, senior energy analyst with Bentek Energy, an arm of Platts, in Evergreen, Colorado.
"We really don't see prices jumping up a whole lot."

Bentek's most recent price outlook forecasts an average gas price of $3.80 per million British thermal units through November, rising to the mid-$4 range by winter.

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