Gas Rigs Gain for Second Week to Rebound From 21-Year LowLynn Doan
Rigs targeting natural gas in the U.S. rose for the second straight week, rebounding from their lowest level in 21 years, as an increase in prices tempted energy producers back into dry-gas plays.
The gas count added seven rigs to 323 this week, data posted on Baker Hughes Inc.’s website today show. The Marcellus formation in the eastern U.S. gained six rigs to 86, the most since Jan. 31, and the Haynesville play of Arkansas, Louisiana and Texas grew by two to 47, a two-year high.
The natural gas rig count is climbing after a 6.3 percent rise in gas futures this month. It follows three straight years of declines in the gas-rig count as energy producers stopped drilling for the fuel in favor of more profitable natural-gas liquids and shale oil.
“Marcellus rigs are now back up to January levels, and the Haynesville is the highest we’ve seen in a long time, so that’s encouraging,” James Williams, president of energy consultant WTRG Economics in London, Arkansas, said by telephone today. “It’s too soon to call this a trend, but with higher gas prices, this is what we’d expect to happen.”
Natural gas for May delivery fell 5.8 cents, or 1.2 percent, to settle at $4.647 per million British thermal units on the New York Mercantile Exchange. Prices have risen 9.9 percent this year.
U.S. gas stockpiles increased 49 billion cubic feet in the week ended April 18 to 899 billion, Energy Information Administration data show. Supplies were 52.9 percent below the five-year average and 48 percent under year-earlier inventories.
“The real problem is whether we’re going to get enough drilling pulled away from oil to meet gas demand,” Williams said. “If we don’t see an indication of it pretty soon, it’s going to drive gas prices higher and drilling will follow.”
Pipeline expansions in the Marcellus should help ease growing gas supplies in the play, with projects coming online through 2015 that may add 3.5 billion cubic feet a day of takeaway capacity, Vincent Piazza and Gurpal Dosanjh, Bloomberg Industries analysts, said in a research report today.
Oil rigs in the U.S. surged by 24 to 1,534, the most since Baker Hughes separated the oil and gas counts in 1987, as producers added horizontally drilling rigs to shale plays across the U.S., from the Cana Woodford of Oklahoma to Texas’s Eagle Ford. Oil rigs accounted for 82.4 percent of the total count, down from 82.9 percent on April 11.
Total rigs have gained by 104 this year to 1,861 as producers use horizontal drilling and hydraulic fracturing to extract record volumes of oil and gas from U.S. shale formations. The boom in output has helped boost domestic oil supplies to the highest level in more than 80 years.
Nabors Industries Ltd. expects the U.S. rig count to be “modestly higher” by the fourth quarter as growth in productivity from existing rigs moderates and demand for new equipment rebounds.
“We’re moving the rig count up and I think the overall market will continue to improve,” Joe Hudson, president of U.S. drilling for Nabors, said in a conference call with analysts April 23.
Total U.S. oil production rose 59,000 barrels a day in the week ended April 18 to 8.36 million, the most since 1988, according to data compiled by the EIA, the U.S. Energy Department’s statistical arm.
Oil supplies rose 3.52 million barrels to 397.7 million, the most since 1931 in EIA weekly data going back to 1982 and monthly government data going back to 1920.
West Texas Intermediate crude for June delivery fell $1.34, or 1.3 percent, to close at $100.60 a barrel on the Nymex, up 2.2 percent this year.
Rigs on land advanced by 28 this week to 1,793. Rigs in inland waters were unchanged at 14. The offshore rig count, primarily in the Gulf, rose by two to 54.
Miscellaneous rigs, which usually drill for geothermal energy, fell by one to four.
Energy rigs in Canada slid by 31 to 168, following a seasonal drilling pattern.