Are Natural Gas Rigs Stabilizing Again?

Gas rig count increases

In the US, there were 225 natural gas rigs operating in the week ending May 29—three more than in the previous week.

Among the major resource shales, two natural gas rigs were added in the Granite Wash and the Eagle Ford Shales, each. The Utica Shale added one more natural gas rig last week. Three fewer natural gas rigs in the Marcellus Shale and two less gas rigs in the Fayetteville Shale partially offset these increases last week.

In the “other basins” rig category, the natural gas rig count increased by three last week. Rigs in “other basins” are those in smaller basins or rigs that don’t fall within a specific geographic basin.

Are Natural Gas Rigs Stabilizing Again?

The rate of decline in the natural gas rig count slowed down in the past four weeks. During this time, three rigs were added to the count. No natural gas rigs went offline in the preceding four weeks, while 46 rigs went offline in the four weeks prior to that.

Since the beginning of this year, the number of natural gas rigs in operation dropped by 103. However, natural gas rigs seem to have stabilized in the past two months.

Fewer natural gas rigs in operation suggest that natural gas producers like Ultra Petroleum (UPL), Newfield Exploration (NFX), Linn Energy (LINE), WPX Energy (WPX), and Pioneer Natural Resources (PXD) are reducing their drilling activity. This could mean a slowdown in production growth or even a production decline. A turnaround in the number of rigs in operation indicates the opposite. It’s positive for these companies. WPX Energy accounts for 0.16% of the iShares US Energy ETF (IYE).

One-year gas rig counts are down

Natural gas rigs have been on a downward trend for about four years. The number of active natural gas rigs decreased also over the last 12 months. A year ago, there were 326 natural gas rigs in operation. Currently, there are 225 rigs. That’s a decrease of 101 rigs or ~31%.

In the 12 months to May 29, 2015, the Haynesville Shale and the Marcellus Shale reported most of the decline in active natural gas rigs. The number of gas rigs decreased by 15 and 19 in these regions, respectively. In the past year, the Eagle Ford Shale added 14 rigs to its natural gas rig total—the most of any shale play in the US.