If we look at estimates of the EURs suggested by producers active in the Barnett shale versus the cumulative production data from wells, there is no close correlation. (Exhibit 7 below.) This comparative data has been collected by Art Berman, a critic of the economic analysis underlying gas shale development, but the data doesn't seem to support the claims of gas shale producers.

To understand the significance of this data, one should examine production from the Barnett based on historic wells and not including newly drilled wells. As the chart in Exhibit 8 shows, if one excludes Barnett wells drilled in the past 12 months, total gas production declines at a 44% annual rate. That decline rate is consistent with gas shale well production profiles, but the rate of decline highlights the problem gas shale producers will face when and if they slow down drilling new wells in the basin. Without significant new well drilling, gas production is at risk, but the flip side of that risk is a higher natural gas price.

Eoin Treacy's view Natural gas remains a game changer for the energy industry. Massive investment in LNG capacity continues and many of the major oil companies now produce more gas than oil. The economics of gas powered vehicles are becoming increasingly persuasive in a high cost energy environment and natural gas's low carbon credentials also endear it to environmentally conscious consumers.

Unconventional natural gas supply, primarily from shale rock in the USA relies on a large number of wells being drilled because of the falloff in flow rates after the initial prolific stage. The race to bring new capacity online has helped to depress prices to a level where it is arguable whether drilling is profitable. The advent of shale oil has also contributed to a lower rig count. At some point, the overhead supply of gas will have been worked through and prices will rise. At present natural gas prices remain in a base formation and a sustained move above $5 would be required to suggest demand is regaining medium-term dominance.

As an aside, Cracker Barrel Old Country Store mentioned in the above report appears to be in the process of completing a first step below the type-3 top and a sustained move back above $50 would be required to question that view.