Why the US rig count is on a slippery slope (Part 3 of 12)
Gas rig counts decreased
The major basins’ natural gas rig count in the US decreased by 12 from the previous week to 328 for the week ending January 2, 2015. Gas rig counts decreased by five for the week. The key reduction occurred in the “other” rigs category, representing rigs in smaller basins or rigs that don’t fall within a specific geographic basin.
Natural gas rig counts have been on a downward trend for about three years. However, the gas-targeted rig count seems to be stabilizing lately. Last week’s gas rig decrease, along with the mayhem in crude oil rigs, may hurt investors’ confidence.
Gas rigs down since 2014
The number of natural gas rigs decreased throughout most of 2014. Recently, the count seems to be on a slight rebound. At the beginning of 2014, there were 372 natural gas rigs. Currently, there are 328 rigs, a decrease of 44 rigs, or ~12%. In the same period in 2013, weekly natural gas rig counts dropped by 67, or ~18%.
In 2014, most of the decrease in natural gas rigs came from the Eagle Ford, where gas rigs fell by 11. In the Barnett and Cana-Woodford Shales, the number of rigs fell by nine each. In 2014, the Granite Wash added the most rigs to its natural gas rig total, with 19 additional rigs.
The year-to-date drop in natural gas rigs continues a downward trend that started in late 2011. Natural gas rigs topped 930 in October 2011.
Key stocks and ETFs
The number of natural gas rigs can show major natural gas producers’ sentiment toward drilling—including producers like WPX Energy (WPX), CONSOL Energy (CNX), Chesapeake Energy Corporation (CHK), and Cabot Oil & Gas (COG). Some natural gas producers are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
In the next part of this series, we’ll discuss drilling activity in the Permian Basin.
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