On January 23, 2012, Chesapeake Energy announced that it would curtail drilling in shale gas plays in the United States. Subsequently, other operators have followed suit. While the outcome of this announcement is unclear, it is a signal that the industry is in distress. One can argue that this distress stems from a lack of discipline as market price began to decline.
After gas prices collapsed in mid-2008, U.S. operators continued to drill as if price did not matter. Many reasons were given to justify the economics of ongoing activity including to hold acreage by production, to fulfill contract obligations to build new pipelines, and since well economics remained favorable at lower prices because of forward hedging. Now, with gas prices below $2.50 per thousand cubic feet (mcf), an adjustment in producer behavior is overdue. Despite statements that shale gas is a profitable venture at low gas prices, it is now clear that the reality has imposed limits on these claims.