Rigs targeting natural gas in the U.S. rebounded from the lowest level since 1993 as an increase in prices this year lures producers back into dry-gas plays.
Gas rigs rose by six to 316 this week as drillers returned to plays from the Fayetteville shale of Arkansas to the Haynesville formation in Arkansas, Louisiana and Texas, Baker Hughes Inc. said on its website. The count dropped the five previous weeks to the lowest level since May 1993, data from the Houston-based oil and gas service company showed.
The rise in the gas count this week follows three straight years of declines as energy producers stopped drilling for the fuel in favor of more profitable natural-gas liquids and shale oil. Gas futures have since rebounded, gaining 3.3 percent in the first quarter and trading above $4 per million British thermal units since December.
“With gas prices up and expected to stay well above $4 for the remainder of the year, there’s obviously more incentive to drill for dry gas and some companies are willing to do it,” James Williams, president of energy consulting firm WTRG Economics in London, Arkansas, said by telephone. “We’re even seeing upward movement in the Haynesville, and that’s a dry, expensive formation.”
Natural gas for May delivery rose 21.1 cents, or 4.7 percent, to settle at $4.741 per million British thermal units today on the New York Mercantile Exchange. Futures have risen 13 percent in the past year.
U.S. gas stockpiles rose 24 billion cubic feet last week to 850 billion, EIA data show. Supplies were 54.3 percent below the five-year average and 50 percent below year-earlier levels.
Following freezing temperatures that drove gas demand to records across the U.S. in the first quarter, the North American market is returning to “a balanced supply-demand situation for natural gas,” Paal Kibsgaard, chief executive officer of energy services company Schlumberger Ltd., said in a conference call with analysts today.
U.S. gas supplies “remain strong on the back of the Marcellus” play in the eastern U.S., he said. The Marcellus added two gas rigs this week, Baker Hughes data show.
The total U.S. rig count was unchanged this week after gaining 52 rigs in the first quarter as producers ramped up drilling in shale formations from North Dakota to Texas. The boom helped the nation meet 87 percent of its energy needs in 2013, the highest since 1985, according to data from the Energy Information Administration.
Oil rigs fell by seven to 1,510 as the count in the Cana Woodford of Oklahoma slid.
Despite the drop, crude production in Texas’s Permian Basin is expected to reach 1.45 million barrels a day in May, the most since at least January 2007, the EIA said in an April 14 drilling report. Output in North Dakota’s Bakken play will rise to a record 1.06 million.
“The prolific rise in domestic crude oil production volume has resulted in a steep fall in U.S. petroleum imports,” Bloomberg Industries analysts Vincent Piazza and Gurpal Dosanjh said in a report yesterday. “Net imports are expected to satisfy about 25 percent of total U.S. liquid fuel consumption in 2015, the lowest level since 1971.”
Total U.S. oil production rose 72,000 barrels a day in the week ended April 11 to 8.3 million, the most since April 1988, according to data compiled by the Energy Information Administration, the U.S. Department’s statistical arm. Oil supplies along the Gulf of Mexico, known as PADD 3, rose 5.17 million barrels to 207.2 million, the most in EIA data going back to 1990.
West Texas Intermediate crude for May delivery increased 54 cents to settle at $104.30 a barrel on the New York Mercantile Exchange, up 20 percent in the past year.