I only saw this after my last post. It gives .020 Bcf/d/rig/yr, vs my estimated .016. Horizontal vs current mix could account for that difference. This scenario has 6 months down, 12 months flat, 3 months back up and then 3 months at the new plateau. We are now 8 months down. At $7.00/kcf to encourage drilling, (see Rockman) we are surely in for close to a year flat. then it is very unlikely that a ramp up could be done in anything near 3 months. Also a good percentage of the old vertical rigs will be scrapped and have to be replaced. Looks to me like at least 3 years to get back to Jan 2009, and maybe as much as 4. Murray

memmel -- adding compression to the wells probably won't be much of a problem except for operators near bankruptcy. Granted, as you say, production has drop to rather low levels at this point. But even if adding compression only offers a very modest return there is another big benefit: you keep the lease active. Most oil/NG leases terminate automatically if a well is shut-in for more then 30 days. If that happens not only does the operator lose the mineral rights but is also obligated to spend $'s to P&A the well. The operational costs come out of cash flow so that's usually not an issue. Buying or leasing the compressor is the bigger hurdle. But if the compression companies have units just sitting in the yard they'll often let the operator pay for it out of cash flow. of course this all assumes there is a net gain of income by going to compression. NG pricing will pretty much control that call.

I agree with you: it's difficult to see rig rates improve significantly even if NG comes back up to $7 or $8/mcf. The NG players are hurting from a cash flow perspective. Add that to being badly burned by the rapid expansion of drilling followed by an even more rapid collapse. The mindset I hear around the coffee pot these days is that they won't be so fast to jump back into water.

Memmel, the problem in the next few months is storage. We will have enough supply to put at least 4.3 Tcf into storage by the end of the injection season, but only have storage capacity for 3.85 Tcf at the most optimistic. Prices will tend to drop to increase demand, and the only real temporary demand increase is coal substitution, which will require a price at or below $3.00/kcf. Some wells may be shut in, but that seems to be a choice of last resort. Rockman can provide enlightenment on that subject.
At 3.85 Tcf in storage, and line pack at max., we will have plenty of NG to get through the next withdrawal season, with high enough storage that, at even 2007 production rates, we would get to fairly adequate storage by Oct 2010, so for some months there will be little pressure on price. However, by maybe late June 2010 it will start to become evident that supply is declining, and adequate storage refill is doubtful. At that point the bidding war for the available supply will start. In Sept. 2010 there is likely to be something close to panic as storage goals get unmeetable. I would guess that there will be delivery failures due to low supply by late Feb. 2011.
Price should stay between $3.00 and $7.00 until about 6/10, and then start to rise. Sept. could see anything from $10.-20. The last time we came close to supply failure, (Q1 2003), prices went to $18.00 interday, and $28.00 for a brief spike intraday.
My "back of the envelope" conclusion is that for the year from end March 2010 to end March 2011, supply will be between 1 and 2 Tcf below demand. One Tcf would bring Q1 2011 storage to a dangerously low level, and 2 Tcf would wipe out storage altogether. Of course, that can't be allowed to happen, so price will go high enough to decrease demand and increase supply, which can lead to an extreme short term spike.
I think Rockman is right about the reluctance to get back into drilling in a big way until it looks like high prices are here to stay, which means fairly delayed return to Sept 2008 capacity. From 2005 to Q3 2008, rig count grew by near 200 rigs per year. I think the highest 12 month period was about 240 rigs. Even at 200 rigs per quarter from Q3 2010 on, my scenarion would likely develop. Murray