Natural gas and oil rigs in the U.S. declined for a second week as energy producers slowed crude drilling and a rally in gas failed to push prices high enough to draw new plays.
The gas rig count dropped by seven to 417, according to data posted on Baker Hughes Inc. (BHI)’s website, near the 13-year low of 413 reached Nov. 9, the Houston-based company’s data showed. The total U.S. energy rig count fell by 11 to 1,800, a five-week low. Oil rigs dropped by four to 1,382, the third decline in a row.
Natural gas rigs rose in November for the first time in 13 months as nuclear power plant outages helped support a rally in gas futures. The total is down to less than a third of its peak of 1,606 in August 2008 as energy producers focused on more lucrative gas-liquids and oil drilling.
“Although we are not planning for a meaningful improvement in natural gas prices, should prices improve next year, the entire North American market has a potential to shift overnight,” Peter A. Ragauss, Baker Hughes’ chief financial officer, said at a conference in New York hosted by Dahlman Rose & Co. Dec. 4.
Natural gas prices are expected to rise to an average of $3.70 per million British thermal units in 2013, Biliana Pehlivanova, an analyst for Barclays Plc (BARC)’s investment-banking unit in New York, said in a note to clients Dec. 4.
Natural gas for January delivery dropped 11.5 cents to settle at $3.551 per million British thermal units on the New York Mercantile Exchange. Prices are up 19 percent this year.
“Natural gas prices are still too weak to justify drilling for most producers in most formations,” James Williams, president of WTRG Economics in London, Arkansas, said by telephone. “It takes about $4 gas to make it worth drilling for half of them, and $4.50 gas for the other half.”
Crude for January delivery on the Nymex fell 33 cents to $85.93. Oil prices are down 13 percent for the year.
Alaska lost the most rigs this week, dropping four to four. Arkansas, Colorado and Pennsylvania each gained one.
Rigs on land tumbled by nine to 1,732. Rigs in inland waters were unchanged at 20, the highest level since August. Miscellaneous rigs, which primarily drill for geothermal energy, were also unchanged at one.
Vertical rigs slipped by two to 506. Horizontal rigs declined by seven to 1,103.
Canadian energy rigs gained for a fourth week, rising by seven to 406, the highest level since March.
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