Fri Apr 13, 2012
* Natural gas-directed rig count hits lowest since April 2002
* Horizontal rig count falls for third time in 4 weeks
* Oil drilling rigs slip slightly from 25-year high
By Joe Silha
NEW YORK, April 13 (Reuters) – U.S. energy producers this week trimmed the number of rigs drilling for natural gas to the lowest level in 10 years, as historically low prices kept squeezing profits and forced some to curb dry gas drilling operations.
The gas-directed rig count slid by 23 this week to 624. It has fallen in 13 of the last 14 weeks to its lowest since mid-April 2002 when there were 613 rigs operating, data from Houston-based oil services firm Baker Hughes showed on Friday.
One of the mildest winters on record cut gas demand sharply and pushed prices down this year. Front-month futures hit another 10-year low of $1.959 per mmBtu on Friday, a level that has made some gas drilling uneconomic.
Low prices have helped homeowners and businesses. They have also attracted more demand from utilities and industry. But they have been bad news for some dry gas producers that have been forced to sell gas at below cost.
The fairly steady drop in dry gas drilling over the last six months — the gas rig count is down a third since peaking at 936 in mid-October — has stirred expectations that low prices had finally prompted producers to slow record gas output.
But the drop has yet to be reflected in pipeline flows, which are still estimated to be at or near record highs, primarily due to rising output from shale.
In its Short-Term Energy Outlook, the U.S. Energy Information Administration for a third straight month sharply raised its estimate for marketed gas production this year.
In this week’s report, EIA said it expects 2012 gas output to climb 4.5 percent to a record 69.22 billion cubic feet per day. Its March outlook had output this year at 67.91 bcf daily.
Horizontal rigs, the type most often used to extract oil or gas from shale, fell for the third time in four weeks, slipping 20 to 1,145, but the count is not far below the all-time high of 1,185 hit in late January.
Separately, the oil-focused rig count fell for the first time in three weeks, down by 7 to 1,322, Baker Hughes data showed.
The oil rig count, although lower than the 25-year high seen last week, is 50 percent higher than a year earlier, when 880 rigs were drilling for oil.
Front-month natural gas futures on the New York Mercantile Exchange, which were down 0.2 cents at $1.981 per mmBtu just before the report was released at 1 p.m. EDT (1700 GMT), showed little reaction to the Baker Hughes data.
Companies such as Chesapeake, the country’s second-largest gas producer and Encana, Canada’s largest, have said they will shut in some gas output or trim spending in pure dry gas plays due to the price slide this year.
Gas prices are down about 34 percent so far in 2012.
But the announced reductions so far total just over 1 billion cubic feet per day, or about 1.5 percent of estimated annual production, not enough to tighten a market saddled with record supplies.
Analysts say the producer shift in spending to higher-value oil and liquids-rich prospects still produces plenty of associated gas that ends up in the market after processing.
The share of horizontal rigs drilling for dry gas is down to about 38 percent from 78 percent just two years ago, but the drop has not been reflected in output, which is still estimated to be running at or near record highs.
Some analysts say the gas-directed rig count may have to drop below 600 to reduce flowing supplies significantly. Most do not expect any major slowdown in gas output until later this year
Statistics: Posted by yoda — Sat Apr 14, 2012 12:03 pm
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