In July of 2008, the natural gas drilling rig count rose to a peak of 1505 rigs in response to natural gas prices in excess of $13 per MMBtu. As prices fell to below $4 per MMBtu, the rig count responded, falling to 665 just one year later in July, 2009. However, this trend seems to have been broken, since even with prices hovering below $4 per MMBtu for weeks on end, the rig count has again started to climb.

According to Baker Hughes, the number of rigs actively searching for natural gas rose to 898 as of August 26th, 2011. This is up substantially from two years ago. But where is the incentive to drill at sub-$4 per MMBtu levels? The answer is natural gas liquids, or NGLs.

NGLs are priced in accordance with crude oil prices. The price of a barrel of NGLs is based on what is considered a normal mix. (The pie chart to the right shows the typical composition of one barrel of NGLs recovered from a natural gas well.) As crude oil prices have risen, the value of NGLs in the natural gas production process has increased accordingly. As a result, producers are not responding to falling prices by curtailing production the way they have historically. Instead, producers are idling rigs in gas basins with lower NGLs and focusing primarily on shale plays that are liquid-rich, i.e.those that contain a higher percentage of NGLs. Many of these liquid-rich shale plays still contain a substantial amount of natural gas.