The Natural Gas Rig Count Is Firmly on a Downtrend



Gas rig count is down

In the US, there were 257 natural gas rigs operating in the week ending March 13, 2015, down by 11 compared to the previous week. Among the major shales, the Haynesville Shale, in southwestern Arkansas, northwestern Louisiana, and East Texas, lost four gas-targeted rigs last week.

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 22 weeks. However, any hope of a strong revival received a blow as the number of gas rigs diminished in each of the last six consecutive weeks.

The turmoil in the crude oil sector has negatively impacted energy investors. The decline in the past five weeks’ gas rig count reduced investor expectations of a turnaround. Natural gas production, however, has been on a continuous uptrend.

Article continues below advertisement

Gas rigs down in the past year

The number of natural gas rigs decreased throughout the last year. A year ago, there were 344 natural gas rigs. Currently, there are 257 rigs. This is a decrease of 87 rigs, or a ~25% difference. In the corresponding period in 2014, weekly natural gas rig counts dropped by 87, or ~25%.

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), Cabot Oil & Gas (COG), Southwestern Energy (SWN), and WPX Energy (WPX). Chesapeake Energy and WPX Energy account for 2.1% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Natural gas rigs in major US shales

In the last year, most of the decline in the natural gas rig count occurred in the Eagle Ford and the Marcellus Shales, where the number of gas rigs decreased by 15 each. In the last year, the Utica and Permian Shales added two rigs each to their natural gas rig total, the most of any drill site in the US.


More From Market Realist