* Natural gas-directed rig count hits lowest since May 2002
* Horizontal rig count falls for second time in 3 weeks
* Oil rigs again hit 25-year high
By Joe Silha
NEW YORK, April 5 U.S. energy producers this
week trimmed the number of rigs drilling for natural gas to the
lowest level in nearly 10 years, as historically low prices
continued to crimp profits and force some to curb dry gas
The gas-directed rig count slid by 11 this week to 647, the
12th decline in 13 weeks, data from oil services firm Baker
The numbers were released a day early on Thursday due to the
Good Friday holiday.
The count is at its lowest since May 2002 when there were
640 rigs operating.
One of the mildest winters on record sharply stunted demand
for gas and put prices on the defensive this year, with
front-month futures hitting another 10-year low of $2.069
on Monday, a level that has made some gas drilling uneconomic.
Low prices have been a boon to homeowners and businesses.
They have also attracted more demand from utilities and
industry. But they have been bad news for some dry gas producers
that have been forced to sell at below cost.
The fairly steady drop in dry gas drilling this year -- the
gas rig count is down 31 percent since peaking at 936 in
mid-October -- had stirred expectations that low prices had
finally prompted producers to slow record gas output.
But the drop has yet to be reflected in pipeline flows,
which are still estimated to be at or near record highs,
primarily due to rising output from shale.
Horizontal rigs, the type most often used to extract oil or
gas from shale, fell for the second time in three weeks,
slipping 15 to 1,165, but the count is not far below the
all-time high of 1,185 hit in late January.
Separately, the oil-focused rig count rose to another
25-year high this week after 11 more rigs came online, bringing
the total count to 1,329, Baker Hughes data showed.
The number of oil rigs this week is 52 percent higher than
during the same period last year, when 877 rigs were drilling
for oil in the United States.
Front-month natural gas futures on the New York Mercantile
Exchange, which were down 5 cents at $2.091 per mmBtu
just before the report was released at 1 p.m. EDT (1700 GMT),
showed little reaction to the Baker Hughes data.
Producers such as Chesapeake, the country's
second-largest gas company, and Encana, Canada's
largest producer, have said they will shut in some gas output or
trim spending in pure dry gas plays due to the price slide.
But the announced reductions so far total just over 1
billion cubic feet per day, or less than 2 percent of estimated
annual production, not enough to tighten a market saddled with
Analysts note that the producer shift to higher-value oil
and liquids-rich prospects still produces plenty of associated
gas that ends up in the market after processing.
The share of horizontal rigs drilling for dry gas has fallen
to 38 percent from 78 percent just two years ago, but analysts
say any slowdown in gas production could take a lot more time.
U.S. Energy Information Administration production data
last week offered little hope for bulls, with January gross gas
output climbing to a record of 72.85 bcf per day, eclipsing the
previous peak of 72.68 bcfd in November.
Some analysts say the gas-directed rig count may have to
drop below 600 to reduce flowing supplies significantly. Most
analysts do not expect any major slowdown in gas output until
later this year.