UPDATE 2-US natgas drilling rig count at 32-month low
* Natural gas-directed rig count at lowest since July 2009 * Gas rig count falls for ninth straight week * Horizontal rig count drops, first time in 3 weeks * Oil rigs again climb to 25-year high By Joe Silha NEW YORK, March 9 (Reuters) - U.S. energy producers scaled back the number of rigs drilling for natural gas for the ninth straight week this week as low gas prices continued to squeeze profits and force some to curb dry gas drilling operations. The gas-directed rig count slid by 21 to 670, its lowest since July 2009. A break below 665 would put the count at a near 10-year low, back to May 2002 when there were 640 gas rigs operating, according to data from Houston-based oil services firm Baker Hughes on Friday. Weak demand during one of the mildest winters on record has helped keep gas prices hovering near the 10-year low hit in January, prompting several producers to cut back. Producers like Chesapeake, the nation's second-largest gas producer, and Encana, Canada's largest gas producer, have said they will shut in some gas output or trim spending in pure dry gas plays due to the price slide. The announced reductions so far total more than 1 billion cubic feet per day, or nearly 2 percent of estimated annual production, but many traders remain skeptical that will have an impact, noting planned cuts so far were not enough to tighten a market over supplied by up to 3 bcfd, or more than 4 percent. Most analysts do not see any major slowdown in dry gas output until late this year, noting the recent slowdown in drilling has not yet been reflected in pipeline flows. Separately, the number of drilling rigs focused on oil rose to another 25-year high this week, up by three to 1,296, data from Baker Hughes showed. The oil rig count this week is 61 percent higher than a year earlier. U.S. energy firms have heated up their search for oil in unconventional prospects from North Dakota to Texas after shifting their resources away from some dry shale gas plays like Haynesville in Louisiana. GAS PRICES FAIL TO REACT The gas-directed rig count is down 28 percent since peaking last year at 936 in October. The decline has stirred talk that low gas prices, off more than a third in the last five months, might finally be forcing producers to slow output. But in a recent report, Bernstein Research said the gas-directed rig count would have to drop to about 600 before they would be comfortable forecasting flat to falling production. Front-month natural gas futures on the New York Mercantile Exchange, which were up 3.4 cents at $2.306 per mmBtu just before the report was released at 1 p.m. EST (1800 GMT), showed little reaction to the data. The near contract hit a 10-year low of $2.23 in late January and has been hovering just above that level this week after an 8 percent slide earlier. That should be well below the cost of most dry gas output. Gas prices have been weighed down for the past year by record high gas production, primarily from shale. Horizontal rigs, the type most often used to extract oil or gas from shale, fell for the first time in three weeks, dropping by six to 1,164. The horizontal count hit an all-time high of 1,185 in late January. The share of horizontal rigs drilling for dry gas has fallen sharply over the last two years due to much higher prices for oil and natural gas liquids (NGLs). Horizontals labeled as gas dropped to just 47 percent of the total at the end of last year. That was down from 80 percent just two years prior. While low gas price should attract more demand from utilities and industry, most analysts agree it will be difficult to balance the gas market without more serious production cuts. Analysts say it can take months for a slowdown in drilling to translate into lower production, noting the producer shift in spending to higher-value oil and gas liquids plays still produces plenty of associated gas that partly offsets any reductions in pure dry gas output.
- Malaysia air probe finds scant evidence of attack: sources |
- Search widened as Malaysia air probe finds scant evidence of attack |
- Confrontation in Ukraine as diplomacy stalls |
- Exclusive: Chinese raw materials also found on U.S. B-1 bomber, F-16 jets
- Freescale loss in Malaysia tragedy leads to travel policy questions