Natural Gas Rig Count Changed Course in the Week Ending April 10
Sharp Reductions in Crude Oil Rigs Bring US Rig Count Down (Part 4 of 10)
Gas rig count is up
In the US, there were 225 natural gas rigs operating in the week ended April 10, 2015—a gain of three compared to the previous week. Among the major shales, the Eagle Ford Shale located in South Texas added two gas-targeted rigs last week. In the “other basins” category—those in smaller basins or those that don’t fall within a specific geographic basin—there were five more active gas rigs.
Falling natural gas rig counts in operation suggest how major natural gas producers like Chesapeake Energy (CHK), Cabot Oil & Gas (COG), CONSOL Energy (CNX), and WPX Energy (WPX) expect lower drilling activity, which means a slowdown in production growth. COG and CNX account for 2.5% of the Energy Select Sector SPDR ETF (XLE).
Natural gas rig counts have been on a downward trend for about three years. The gas-targeted rig count seemed to have stabilized over the past six months, showing nine increases in that period. However, any hope of revival has now been dashed by nine consecutive weeks of smaller gas rigs counts before last week’s increase.
The decline in the nine weeks before last week took the natural gas rig count down by 97 and reduced investor expectations of a turnaround in the natural gas rig count trend. Natural gas production, however, has been on a continuous uptrend.
One-year gas rig counts are down
The number of active natural gas rigs decreased throughout the last year. A year ago, there were 310 natural gas rigs in operation. Currently, there are 225 rigs. That’s a decrease of 85 rigs, or a ~27% difference. In comparison, weekly natural gas rig counts dropped by 67 by the week ending April 11, 2014, down ~22% from a year earlier.
Natural gas rigs in major US shales
In the last year, most of the decline in the natural gas rig count occurred in the Barnett and Haynesville Shales, where the number of gas rigs decreased by 11 and 16, respectively. In the last year, the Eagle Ford Shale added five rigs to its natural gas rig total—the most of any shale play in the US.
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