Shale gas basins are responsible for North America's gas boom, but it's producer joint ventures (JV) that are in part responsible for the seemingly relentless drilling in a low-price environment. JVs with drilling carries will help support drilling activity, supporting a rig count that will "only fall modestly in 2011," Barclays Capital analysts said Tuesday.

"...[T]he rigs that are funded partially by JV are highly unlikely to stop drilling until the drilling carries have been fully paid," the analysts said. "In other words, these rigs are highly inelastic to prompt price."

A JV that features a drilling carry gives the seller of interests payment for the majority of the costs associated with the minority interest in producing wells. Carries reduce capital intensity and make it less expensive to realize production growth, the analysts explained, as the incremental cost of adding wells is reduced for the JV partner receiving the carry funds.

JVs can be a combination of carry payments and upfront payments or just one or the other. "...[O]n average, more than half of the funds from these [JV] agreements are...paid through drilling carries," they said.

The Barclays team estimated that 100-125 gas-directed rigs, or about 10% of current gas drilling activity, is supported by JVs. "It is likely that this number could grow higher still," they said.

Many agreements last for a few years and have clauses allowing for additional areas of mutual interest between the partners, the analysts said. And "...the recent accelerated pace for agreements and statements from producers suggest that there is more appetite to negotiate new deals."

JVs and their drilling carries aren't the only pillow under low gas prices. Liquids-rich gas production, such as that from the growing Eagle Ford Shale play in South Texas, allows for better returns in a low-price environment as liquids prices track those for oil.

"Our estimate of 100 rigs committed for JV agreements combined with our previous count of 200 rigs drilling liquids-rich gas targets together account for nearly one-third of the current gas-directed rig count," they said.

Also still supporting the gas rig count is the need to drill to hold production, the analysts noted.