Activity in the Marcellus Shale hasn’t declined even in the face of weak natural gas prices, a Williams Cos. executive said Thursday.

The shale play is “well positioned to survive a very low gas price environment,” said Alan Armstrong, who now helms Williams midstream unit. “We’re certainly not seeing any signs of people backing off in the most prime parts of the Marcellus.”

Armstrong, who is set to take over the CEO chair when Steve Malcolm retires at the end of this year, shared a microphone with the executive team during a conference call with energy analysts last week. Williams has been repositioning itself in the Marcellus, where it now holds more than 100,000 net acres.

Malcolm told analysts that the company now is operating three rigs in the play and plans to increase the rig count to six late next year.

“We’re very excited about the progress that we’re making to grow out businesses in the Marcellus Shale,” said Malcolm. “Current returns are greater than 30%…We have seen and expect significant continued improvements as Williams becomes operator and as we proceed with the large Susquehanna [county in Pennsylvania] drilling program…We now have 100,000 net acres at an average cost of less than $7,000 an acre [and] gross production near 20 MMcf/d at the end of the third quarter…”

The midstream operations also are growing in the play, Malcolm said. Laurel Mountain midstream gathering system projects “ultimately will provide over 1.5 Bcf/d of gathering capacity and 1,400 miles of gathering lines, including 400 new miles of large diameter pipe.” Construction also has begun on the Shamrock Compressor Station, which would have initial capacity of 60 MMcf/d, expandable to 350 MMcf/d.

“Marcellus will soon become our second largest producing basin,” said Malcolm. “A couple other key points: our drilling returns remain strong and our major operating areas of the Piceance, Marcellus and Powder River have returns ranging from 17% to near 40% — even in this low natural gas price environment.” Part of the reason is efficiency, he noted. In Colorado’s Piceance Basin Williams has improved its well costs by 3-6% versus 2009.

“We decreased our rig counts for 2011 by nine rigs and 2012 by 17 rigs from our previous guidance, and simply put, we can do that and yet preserve our value and leases while we wait for gas prices to improve,” said the CEO. “And we still expect to grow our production by 3% in 2011 [and] 7% in 2012.”

Ralph Hill, president of the exploration and production business, said in 2011 Williams will have 11 rigs running in the Piceance Basin. In the Barnett Shale, “we’ll be down to one rig” from three.

Asked if Williams had considered selling its leasehold in the Barnett, Armstrong said the company had looked at all of the options, and that was one of them.

“It depends on what’s going on in the marketplace, but Barnett has been frustrating simply from a standpoint of a lot of what we saw was just a complete delay in the opportunities to get the facilities we needed to,” he said. “It wasn’t the drilling permits — just actually to get the facilities done to get our gas to market, and that caused a…chain reaction in losing value.”