Chesapeake Energy Corporation (CHK), SandRidge Energy Inc. (SD): Natural Gas Just Got More Expensive in These Countries

Meanwhile, other producers like EQT Corporation (NYSE:EQT) have decided to all but abandon higher-cost shale plays and only focus on those that can deliver profits. Because of this, the company made the decision to quit drilling the Huron Shale because it simply couldn’t earn a high enough rate of return to keep drilling.

Instead, EQT turned its full attention on the Marcellus, where wells can run between $5.4 million and $8.7 million depending on the lateral length, because the economics were much better. The expected ultimate recovery likely has a lot to do with this — the best the Huron has seen (as of 2011 data) is 2 billion cubic feet equivalent (bcfe) versus the Marcellus’ 9.8 bcfe. Because of this, the company has said it won’t return to the Huron until natural gas prices are high enough to justify such a move.

While natural gas consumers in both India and China aren’t likely to appreciate the price spikes, these moves are in the best long-term interest of both nations. Neither country can really afford to continue to artificially keep prices low, especially when it’s keeping domestic production at bay. As you can see from these four examples, oil and gas companies will only drill when the profits are there. These companies will either move into more profitable fields, like SandRidge Energy Inc. (NYSE:SD) and EQT are doing, or simply cut investments like Ultra has done. That’s why over the long term these moves in both China and India to raise natural gas prices should pay off because it will encourage domestic natural gas producers to invest in an effort to increase production.

Fool contributor Matt DiLallo owns shares of SandRidge Energy Inc. (NYSE:SD) and has the following options: short September 01 2013 $5 puts on SandRidge Energy Inc. (NYSE:SD). The Motley Fool recommends Ultra Petroleum Corp. (NYSE:UPL). The Motley Fool owns shares of Ultra Petroleum and has the following options: long January 01 2014 $20 calls on Chesapeake Energy Corporation (NYSE:CHK), long January 01 2014 $30 calls on Chesapeake Energy, short January 01 2014 $15 puts on Chesapeake Energy Corporation (NYSE:CHK), long January 01 2014 $30 calls on Ultra Petroleum Corp. (NYSE:UPL), long January 01 2014 $40 calls on Ultra Petroleum, and long January 01 2014 $50 calls on Ultra Petroleum Corp. (NYSE:UPL).

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