Natural gas rig count rises marginally
The natural gas rig count increased during the week ending April 10 after dropping for nine straight weeks. According to Baker Hughes, an oilfield services company, the natural gas rig count increased to 225 on April 10, compared with 222 on April 3.
However, the rig count was substantially lower than the 310 seen during the same week last year. The number of oil rigs that also produce some natural gas continued to fall. The oil rigs dropped to 760 on April 10, which was 42 less when compared with 802 on April 3.
A drilling rig is a piece of equipment that is used to dig a hole into the earth’s surface. Rigs are used to drill oil and natural gas wells. Rigs can be set up onshore and offshore. Onshore rigs are usually moved once a well is drilled, while offshore rigs are more permanent. The higher the gas rig count, the higher the future natural gas production.
What does this mean?
The natural gas rig count represents producers’ sentiments. If producers expect an increase in demand, the rig count will likely increase as producers drill more wells. The inverse is also true. An increasing natural gas rig count in a stable demand environment is a negative indicator for coal producers (KOL), such as Alliance Resource Partners (ARLP), Cloud Peak Energy (CLD), and Arch Coal (ACI).
However, a decrease in rig count may not be positive for coal producers. The impact on utilities (XLU) depends on the revenue model and the level of regulation.