RE: RE: RE: RE: RE: RE: RE: RE: RE: More Insider BYes, from current stock price.
Per RRC's presentation, the horizontal Marcellus wells' IRR is more than 30% at $4/mmbtu NYMEX price, assuming $3.5 million/well cost, EUR 3.6 Bcfe. At $5/mmbtu Nymex price, the IRR is 46%.
And at $4/mmbtu NYMEX price, most companies will stop drilling. Consider the price differencial in Canada or in Rocky/mid continent etc., current spot NG price is less than $3.
Usually the F&D is $1.5-$3/mcf, the LOE is $1.5-$2/mcf, then add the production tax, G&A, interest expense, the total cost is $4/mcf at least for more than 90% producer, I think.
EPS' gas will received a premium to NYMEX gas and the Marcellus shale horizontal well is very low cost producer, so it will have very high IRR even at current ng price.
Have or one year later, since so many ng rig being dropped, the ng production will decrease to match demand and then price need to go up for more drilling.
Companies with very good assets, low debt, low production cost will continue to drill.