Shale-Gas Boom May Stall as Price Slump Erodes Cash

Drilling in U.S. shale-gas formations may tumble as companies run short of cash after prices for the fuel languished below the cost of production for more than a year.

Natural-gas explorers will realize the need to cut drilling in the next few months, said Murry Gerber, chairman of EQT Corp., the largest producer in the Appalachian Basin. “I think the rig count is going to come down, and then you’ll see the production follow,” he said in a telephone interview.

U.S. gas output climbed the past four years, contributing to a glut, as drilling advances unlocked fuel-rich shale formations from Louisiana to Pennsylvania. Gerber said producers typically need prices of $6.50 to $7 per million British thermal units to make a “reasonable” return. Gas hasn’t been that high since December 2008 and traded below $4 this week.

Business Week