US Rig Count Losses Decelerate (Part 3 of 9)

(Continued from Part 2)

In the US, there were 233 natural gas rigs operating in the week ended March 27, 2015, down by nine compared to the previous week. Among the major shales, the Eagle Ford Shale in South Texas lost three gas-targeted rigs last week. In the “other basins” category, there were four fewer active gas rigs. Other rigs are those in smaller basins or those that don’t fall within a specific geographic basin.

Natural gas rig counts have been on a downward trend for about three years. The gas-targeted rig count appeared to have stabilized over the past six months, increasing ten times in that period. However, any hope of a strong revival has now been dashed by eight consecutive weeks of smaller gas rigs counts.

The turmoil in the crude oil sector has negatively affected energy investors. The decline in the past eight weeks took the natural gas rig count down by 81 and reduced investor expectations of a turnaround. Natural gas production, however, has been on a continuous uptrend.

The number of natural gas rigs decreased throughout the last year. A year ago, there were 318 natural gas rigs. Currently, there are 233 rigs. This is a decrease of 85 rigs or a ~27% difference. In the corresponding period in 2014, weekly natural gas rig counts dropped by 71, or ~22%.

The number of natural gas rigs in operation suggests how major natural gas producers may be feeling about drilling these days. These producers include Chesapeake Energy (CHK), Anadarko Petroleum (APC), CONSOL Energy (CNX), and WPX Energy (WPX). Anadarko Petroleum and CONSOL Energy account for 3.7% of the Energy Select Sector SPDR ETF (XLE). Anadarko Petroleum makes up 1.7% of the iShares Global Energy ETF (IXC).

In the last year, most of the decline in the natural gas rig count occurred in the Barnett and Haynesville shales, where the number of gas rigs decreased by 11 and 12, respectively. In the last year, the Permian Basin added three rigs to its natural gas rig total—the most of any shale play in the US.

Continue to Part 4

Browse this series on Market Realist:

• Part 1 - Drop in US Rig Count Slows after 3-Month Collapse
• Part 2 - The US Crude Oil Rig Count Falls by Just 12
• Part 4 - Permian Basin Rig Count Only Marginally Lower