High-Cost Natural Gas Tax Rate Incentive Study

Rider Element F

Rider Element F: Attempt to identify natural gas break-even prices in different shale plays throughout the state.

According to IHS7, Inc., a data and forecasting firm, the break-even price for natural gas plays within Texas (as of June 24, 2014) was estimated to be as follows:

Predominately Dry Natural Gas* Break-Even Price per MMBtu (million BTUs)
Barnett Shale (core) $6.61
Eagle Ford East Dry Gas $10.50
Eagle Ford West Dry Gas $6.56
Haynesville Tier Two $4.26
Cotton Valley Horizontal $4.62
Predominately Wet Natural Gas** Break-Even Price per MMBtu
Eagle Ford East Wet Gas $-1.458
Eagle Ford West Wet Gas $1.46
Granite Wash Wet Gas (Texas) $1.22

* natural gas (methane) possibly also containing, but not in significant amounts, natural gas liquids.
** natural gas (methane) and containing, in significant amounts, natural gas liquids such as butane, propane, and ethane, for example. Such liquids tend to enhance the profitability of a natural gas well as these liquids are priced more closely to crude oil than to dry (methane) natural gas.

A Massachusetts Institute of Technology interdisciplinary study on the future of natural gas (released in 2011, and based on data from 2009) included in its Appendix 2D an economic analysis of the break-even prices for natural gas in the major U.S. plays. For those natural gas plays within Texas the estimated break-even prices9 were as follows:

Dry Natural Gas Break-Even Price per MMBtu
Barnett Shale $5.84
Haynesville Shale (TX and LA) $1.46

  • 7 Source: IHS Inc. The use of this content was authorized in advance by IHS. Any further use or redistribution of this content is strictly prohibited a without written permission by IHS. All rights reserved.
  • 8 This negative amount means that natural gas could be disposed of at a loss of this amount because revenue from condensate and natural gas liquids production alone would justify the drilling of a new well.
  • 9 Assuming mid-range well drilling/completion costs and average initial production rates.