NEW YORK (TheStreet) -- Natural gas from hydraulic fracking has been the great advance that could propel the U.S. toward becoming truly energy independent. But for the energy companies producing natural gas from fracking, it has created big problems.
That's because the production of natural gas from shale has become so prolific that it has helped to positively crater the prices for natural gas. Although low prices are good for industrial development and for consumers, they are very bad for the bottom line for energy companies.
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That's clear from the headline Monday that Encana (ECA) , one of Canada's largest natural gas companies, has agreed to buy Athlon Energy (ATHL) , a relatively new oil producer in the Permian Basin, for close to $6 billion dollars. Although Encana is a solid energy company with tremendous assets and a terrific balance sheet, it is primarily a natural gas producer that has missed out on the big profits that have gone in the last two years to companies concentrating on procuring oil from shale.
Following is a chart that perfectly represents the flood of surplus natural gas production from shale.
Courtesy of Energy Information Administration
The explosive increases in gas production are a representation of a kind of self-defeating race for gas producers, as each tries to increase production while reducing its costs of production. This has been particularly evident with the producers in the Marcellus, and although some of the really sharp players have continued to shave away at their costs, the continuing low price for their natural gas has helped keep their profits in check.