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Nobody is drilling for 2028
The forward curve is flat for 2028, 2029, and 2030, despite AI compute announcements and the investments behind them. Producers are not responding either. One major producer is shutting in gas right now because it expects the gas to be worth more later, and the rig count, which can be watched in real time, shows no sign that anyone is gearing up.
The 2028 physical market is also illiquid. Utilities and gas generators have not yet started to hedge or to buy gas for that year, and that is where the action is expected to begin. Once they do, the forward curve could move materially within six months, and the scramble to secure physical natural gas for 2028 would be a knife fight like nothing seen before.
Investors are still willing to look past the near term when it means paying for something untested in 2035, but not to look past this summer's heat or a brief outage at an LNG facility to see 2028. Expand Energy, for example, trades at four times EBITDA with a low-to-mid-teens free cash yield on a curve that ignores what is likely to get plugged in.
What does shutting in gas mean?
Shutting in a well means a producer stops its flow while leaving the well intact. Producers do this when prices fall below what they consider worthwhile, planning to sell later at a higher price. The gas stays in the reservoir and can be produced again once the well is reopened.
Why does the rig count signal future supply?
Baker Hughes publishes the number of active drilling rigs every week. Wells take weeks or months to drill and complete, so rigs added now translate into production a few months later. A flat or falling count suggests that supply growth is not being prepared.
What makes a thin forward market volatile?
In an illiquid market, few buyers and sellers trade, so a single large order can move the price sharply. When many utilities begin hedging at once, they compete for the same limited supply. Prices in such markets can rise quickly as the new buyers bid against one another.
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