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The Natural Gas Rig Count Fall Finds Support from Crude Turmoil

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Gas rig count is down

In the US, there were 242 natural gas rigs operating in the week ended March 20, 2015, down by 15 compared to the previous week. Among the major shales, the Eagle Ford Shale in South Texas lost three gas-targeted rigs last week. In the “other basins” category, there were 14 fewer active gas rigs. Other rigs are those in smaller basins or those that don’t fall within a specific geographic basin.

However, in the Marcellus shale, the gas rig count rose by six rigs last week.

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Natural gas rig counts have been on a downward trend for about three years. Yet the gas-targeted rig count appeared to stabilize in the past six months, increasing ten times in the last six months. However, any hope of a strong revival received a blow, as the number of gas rigs diminished in each of the last seven consecutive weeks.

The turmoil in the crude oil sector has negatively affected energy investors. The decline in the past seven weeks took the gas rig count down by 72 and reduced investor expectations of a turnaround. Natural gas production, however, has been on a continuous uptrend.

Gas rigs are down in the past year

The number of natural gas rigs decreased throughout the past year. A year ago, there were 326 natural gas rigs. Currently, there are 242 rigs. This is a decrease of 84 rigs, or a ~26% difference. In the corresponding period in 2014, weekly natural gas rig counts dropped by 92, or ~28%.

The number of natural gas rigs in operation suggests how major natural gas producers may be feeling about drilling these days. These producers include Chesapeake Energy (CHK), Anadarko Petroleum (APC), CONSOL Energy (CNX), and WPX Energy (WPX). Anadarko Petroleum and CONSOL Energy account for 3.9% of the Energy Select Sector SPDR ETF (XLE). Anadarko Petroleum is 1.7% of the iShares Global Energy ETF (IXC).

Natural gas rigs in major US shales

In the last year, most of the decline in the natural gas rig count occurred in the Barnett and Haynesville shales, where the number of gas rigs decreased by 11 each. In the last year, the Permian Basin added three rigs to its natural gas rig total—the most of any shale play in the US.

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