May 3, 2013 / 5:50 PM / in 5 years

UPDATE 1-U.S. natgas rig count hits 18-year low-Baker Hughes

* Gas-directed rig count hits lowest since June 1995
    * Horizontal rigs climb slightly from 20-month low
    * Oil rig count gains for fifth time in 6 weeks

    NEW YORK, May 3 (Reuters) - The number of rigs drilling for
natural gas in the United States fell this week for the second
straight week, hitting its lowest level in nearly 18 years as
producers continued to pull back from dry gas drilling.
    The gas-directed rig count slid by 12 this week to 353, its
lowest since June 1995, when the count stood at 340, data from
Houston-based Baker Hughes showed on Friday.
    Producers have mostly been curbing dry-gas drilling in favor
of more profitable oil and liquids-rich plays such as Eagle Ford
in Texas and Marcellus in Appalachia.
    But the 40 percent run-up in spot gas prices since
mid-February to a 21-month high of $4.444 per million British
thermal units just this week, had stirred concerns that gas
output, still flowing at or near record highs, could increase in
coming weeks.

    The oil-focused rig count rose by 22 to 1,403, its fifth
gain in six weeks, Baker Hughes data showed. The oil count is up
48 rigs, or 3.5 percent, from the same week last year.
    Baker Hughes also reported that horizontal rigs, the type
often used to extract oil or gas from shale, gained eight this
week to 1,092, up from the 20-month low of 1,084 first hit four
weeks ago. The horizontal count is down 8.5 percent from the
record high of 1,193 set last May.
    Drilling for natural gas has mostly been in decline for the
last 18 months. The count is down about 62 percent since peaking
in 2011 at 936, but so far production has not slowed much, if at
all, from the record high hit last year.
    On Thursday, data from the U.S. Energy Information
Administration showed that gross gas production in February
unexpectedly climbed after two straight monthly declines. 
    The associated gas produced from more profitable shale oil
and shale gas liquids wells has kept dry gas flowing at a brisk
rate. The U.S. Energy Information Administration expects
marketed gas production to edge up slightly in 2013 to its third
straight yearly record.
    Gas futures prices, which were up about 1.5 cents in the 
$4.04 area just before the Baker Hughes data was released, were
little changed from that level after the report.
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