June 7 (Bloomberg) -- Natural gas rigs in the U.S. were unchanged for a third week at 354, remaining close to their lowest level in 18 years, according to Baker Hughes Inc.
Oil rigs declined by four to 1,406, data posted on Baker Hughes’ website show. Total energy rigs fell by six to 1,765, the Houston-based field-services company said.
The number of U.S. gas rigs has dropped to less than a quarter of its peak of 1,606 reached in August 2008 as producers have focused on crude and liquids. The decline to 350 the week of May 10 was the lowest count since June 1995. An increase in gas prices this year should lure drillers back into some low-cost basins, with gas activity expected to recover by next year, according to Barclays Plc.
“We’re looking at maybe 50 to 100 incremental rigs being directed toward gas activity,” James C. West, an oil services and drilling analyst at Barclays Plc’s investment-banking unit in New York, said by telephone June 4. “Demand for natural gas is going to grow pretty quickly, and they’re going to want to support that demand.”
Natural gas for July delivery rose 0.1 cent to settle at $3.828 per million British thermal units on the New York Mercantile Exchange, up 68 percent from a year ago.
U.S. gas stockpiles gained 111 billion cubic feet in the week ended May 31 to 2.252 trillion cubic feet, above the five-year average injection of 92 billion, the Energy Information Administration, the Energy Department’s statistical arm, said yesterday. Supplies were 3 percent below the five-year average.
WPX Energy Inc., a Tulsa, Oklahoma-based oil and gas producer, will run seven gas rigs in western Colorado’s Piceance Basin for the rest of this year, up from its initial plan of five, the company said in a statement June 5.
“Now’s the right time for us to accelerate our natural gas production and the Piceance is the right place to start,” Ralph A. Hill, WPX’s chief executive officer, said in the statement. “Natural gas prices are stronger, and this helps lay the groundwork for our 2014 development.”
The capital expenditures of U.S. oil and gas producers rose 20 percent last year to a record $185.6 billion, primarily because of tight oil and liquids plays, according to a survey released by Ernst & Young June 4.
The spending “speaks to the incredible opportunity unfolding in tight oil from shale formations and the high cost of developing these unconventional resources,” Marcela Donadio, Americas oil and gas leader for Ernst & Young, said in a statement. “Everyone wants in and they are paying a premium to play.”
U.S. oil output climbed 0.1 percent to 7.3 million barrels a day last week, EIA data show. Production reached 7.37 million barrels a day in the week ended May 3, the most since 1992. Stockpiles slid 6.27 million barrels, the most since December.
Crude for July delivery rose $1.27, or 1.3 percent, to $96.03 a barrel today on the Nymex. Prices have gained 13 percent in the past year.
Oil futures have traded as much as 25 times higher than gas futures this month, compared with a 10-year average of 15 times, according to data compiled by Bloomberg.
Barclays said in a June 4 report that exploration and production spending in the U.S. will increase 2 percent this year, up from a December forecast of 0.6 percent growth.
The recovery in North America drilling “has taken hold and will likely gain some momentum,” West said. “There’s optimism out there among the oil and gas companies and certain oil services companies are being told by the companies to prepare for activity.”
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