Natural-Gas Price Projection Raised

From the time when we last revised our natural gas forecast higher (in  February 2006) until now, we have continued to see natural-gas finding and development costs climb in North America. We think the price required to induce new marginal producers to invest in new supply is around $7-$8 per thousand cubic feet (mcf) over the next five years. On the low end, we think the large installed base of gas-fired power plants should help support prices above $5 per mcf. Although liquefied natural gas should displace some high-cost domestic production over the next five years, we don't see it as a significant threat to our new natural-gas price deck.

Our new five-year natural gas price deck:
2007: $7.80
2008: $7.60
2009: $7.10
2010: $7.20
2011: $7.40

Our previous price deck:
2007: $7.70
2008: $7.10
2009: $6.20
2010: $6.30
2011: $6.40

Increases in our fair value estimates will vary. For firms that concentrate on oil or those pursuing an integrated strategy, we expect fairly small changes. However,  we expect more significant adjustments to our fair value estimates for smaller, independent firms focusing on North American natural-gas production. Please refer to the valuation section of each company's Analyst Report to see how our fair value estimates are changing on a firm-by-firm basis.