Oilfield services firm Halliburton anticipates that US natural gas prices, which have strengthened substantially from year-ago levels, could rise to levels that reinvigorate natural gas drilling in 2014.

“We are becoming increasingly optimistic about gas activity in 2014,” said Halliburton chief executive Dave Lesar during the company’s first-quarter 2013 earnings call on 22 April.

Natural gas prices at the Henry Hub – the delivery point for Nymex natural gas futures contracts – have improved dramatically since this time last year. The Henry Hub spot price was $4.21 per million Btu (MMBtu) on Aprll 12, 2012, according to Energy Information Administration (EIA) data. It was less than half that, at $1.87/MMBtu, on April 12, 2012. Low prices have led drillers to shun gas drilling and direct capital to oil and natural gas liquids (NGL) targets, which offer better returns.

Prices have now risen to the point where exploration and production companies can turn a profit in gas plays, according to Lesar. “Four dollar-plus gas, where they can lock hedges in, is getting to the point where a lot of these fairway players actually can be quite profitable from a returns standpoint,” he said. Hedging – locking in sales prices, or a range of sales prices, on future production – enables companies to guarantee stable cash flows from expected output, and to soften the impact of price declines.

“If gas prices do stay in the above-$4.00 level, that only adds to the potential optimism that we have,” Lesar said.

But Lesar remains circumspect about a ramp-up in gas drilling this year. “Our outlook for natural gas activity this year has not materially changed,” he said. “We will need to see sustained pricing improvements before gas activity will meaningfully increase.”

He said that the availability of associated gas – gas that is produced as part of the oil extraction process – and the opportunity to reconnect already-drilled gas wells that were shut in due to low prices will delay any meaningful increase in the number of new gas wells that companies opt to drill. “If we see improvements in the gas basins, it will likely be late in the year,” said Lesar.

“With the exception of the Marcellus, where we are already very active, our view is that natural gas drilling will not be a major activity driver in 2013 in the US,” said Lesar.