Analyst Dan Pickering stirred up debate at the A&D Strategies and Opportunities conference recently when he predicted natural gas prices would trend to $7.50 per Mcf in 2010, a far cry from the sub $3 mark at the time, emphasizing his call with a happy face and labeling his talk "2010---The Year of Feeling Better." "The die is cast for 2010," he says. The co-president and head of research for Tudor, Pickering, Holt & Co. bases the target price on the freefall of supply. "By the middle of next year, given how steeply rig count is falling and given base decline rates of about 25% for total production, we're going to be down about 7 Bcf per day. It doesn't matter if the winter is cold or hot, or if a hurricane affects things---things are going to tighten up and the market is going to get better." For A&D, he says, 2010 is going to be a year in which companies breathe a sigh of relief. "If gas is going to be $7.50, that will feel a whole lot better than today. Folks that have been holding on hoping things will get better are going to get a respite." So the likelihood of forced selling in 2010 will diminish, although "we still have to get through 2009." He expects many companies, particularly private-equity backed, that have been on the sidelines will try to catch the rebound as prices trend up. But wait. The smiley face comes off in 2011, which is the Return-To-Reality year per Pickering. With the ability to add supply fairly easily and quickly, and with shale-gas basins producing more with fewer wells, the feel-good run-up to $7.50 will deflate a bit as supply fills the gaps. "I'm using a number that has a 6 on it," he states. Likely: $6.50 for 2011. The wake-up call is going to be for the "have nots," he says, those companies operating in high-cost basins. "What if you need $7.50 gas to make money?" he questions. And how do these have-not operators survive? "You look at those places where you can operate cheaper and you buy your way into them. We call it consolidation via necessity--folks are going to wind up in different spots." Check your F&D costs now.