Rigs targeting natural gas in the U.S. rose to the highest level in five months after those drilling horizontally for the fuel gained in the Marcellus formation of the eastern U.S.
Gas rigs jumped by eight to 338, the highest level since March 14, data posted on Baker Hughes Inc.’s website show. The oil count rose by 11 to 1,575 after sliding by 25 last week, the Houston-based field services company said. The Marcellus formation, the nation’s biggest onshore gas play, added the most rigs, gaining five drilling horizontally for gas and raising its total count to a two-month high.
The energy rig count is surging in the U.S. as producers use horizontal drilling and hydraulic fracturing to draw record volumes of oil and gas out of shale formations from North Dakota to Texas. The boom has raised domestic crude production to the highest level in 28 years, driving out oil imports.
“Gas prices aren’t healthy for a lot of plays, but for the wet area of the Marcellus, where you can also get high prices for liquids in the gas, it’s certainly good enough,” James Williams, president of WTRG Economics, said by telephone today. “This is also an indication that we’re finally getting pipeline infrastructure into the Marcellus to take gas away. Why drill the well if you can’t get it out?”
Natural gas for October delivery gained 2.1 cents to settle at $4.065 per million British thermal units today on the New York Mercantile Exchange, up 12 percent in the past year.
U.S. gas stockpiles rose 75 billion cubic feet last week to 2.63 trillion, according to the EIA. Supplies were 16.5 percent below the five-year average.
“Prolific, resilient Marcellus natural gas production is expected to continue” to rise, Bloomberg Intelligence analysts Vincent G. Piazza in Skillman, New Jersey, and Gurpal Dosanjh in New York said in a research note Aug. 20.
“Output remains strong, though new well productivity growth continues to slow from abnormally high levels,” they said. “The pace of overall volume is pressuring regional infrastructure.”
Oil production rose 54,000 barrels a day, or 0.6 percent, in the week ended Aug. 22 to 8.63 million, Energy Information Administration data show, the highest level since 1986. Oil supplies dropped 2.07 million barrels to 360.5 million.
West Texas Intermediate crude for October delivery rose $1.41 to $95.96 a barrel on the Nymex, down 12 percent in the past year.
Those with both oil and gas positions in U.S. plays will still choose to drill for crude as the returns remain higher, Evan Turner, energy analyst at the London-based research company GlobalData Ltd., said by telephone from New York.
“Oil is still definitely what you want to drill for,” he said.