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Natural Gas Rigs Drive the Turnaround in US Rigs

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Jul. 2 2015, Published 5:48 p.m. ET

Natural gas rig count

In the US, there were 228 natural gas rigs operating in the week ending June 26—five more than in the previous week. This marks the second straight weekly natural rig count addition.

In the “other basins” rig category, the natural rig count rose by four last week. The rigs in “other basins” are those in smaller basins or rigs that don’t fall within a specific geographic basin. Read the following section to know what happened to the crude oil and natural gas rigs in the key shales.

Since the beginning of this year, the number of natural gas rigs in operation fell by 100. However, natural gas rigs seem to have stabilized in the past two months. On average, one natural gas rig was added in the four weeks ending June 26.

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What does this mean?

A higher number of natural gas rigs in operation suggests that natural gas producers like CONSOL Energy (CNX), Southwestern Energy (SWN), Linn Energy (LINE), WPX Energy (WPX), and Pioneer Natural Resources (PXD) might be rising or on the verge of increasing their drilling activities. This could mean a rise in production. In contrast, a fall in the number of rigs in operation indicates a slowdown in production growth or even a fall in production. This would be negative for these companies. WPX Energy accounts for 0.16% of the iShares U.S. Energy ETF (IYE).

MLPs (master limited partnerships) specializing in natural gas storage and transport activities like AmeriGas Partners (APU), DCP Midstream Partners (DPM), and ONEOK Partners (OKS) could benefit if production rises.

One-year comparisons

Natural gas rigs have been on a downward trend for about four years. The number of active natural gas rigs also fell over the last 12 months. A year ago, there were 314 natural gas rigs in operation. Currently, there are 228 rigs. That’s a fall of 86 rigs, or ~27%.

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