By March 21, 2016 Read More →

Rig count at historic low, but gas production still high

Fewer rigs but higher production suggests drilling is more efficient

There were 94 active natural gas-directed rigs as of March 11, 2016, according to Baker Hughes Inc., a decline of three units from last week, when rigs fell below 100 for the first time in the 29-year rig data history.

Source: U.S. Energy Information Adminstration

Source: U.S. Energy Information Administration.

Natural gas-directed rigs are currently 63 per cent below their year-ago level and 89 per cent below their level five years ago, according to the US Energy Information Administration.

While rigs have declined dramatically in the past several years, production has grown steadily, indicating that drilling has become more efficient.

Production data have only recently begun to show some signs of flattening after hitting a record high in September 2015.

While dry production grew 5.4 per cent from 2014 to 2015, EIA’s Short-Term Energy Outlook projects that growth will flatten to 0.9 per cent  in 2016 with declining rig counts and sustained low prices.

For 2017, EIA forecasts production to grow 2.1 per cent year-over-year as prices rise somewhat. EIA expects production in the later part of 2016 and 2017 will pick up, particularly as new pipeline projects come online in the Marcellus and Utica shales.

According to data from Bentek Energy, total supply fell by 1.9 per cent, driven by a 1.5 per cent decline in dry production. Although pipeline imports from Canada fell overall this week, there was regional variation.

Imports from Canada increased in both the West and Midwest, but the Northeast drove the national decline. Every day last week, the Northeast was a net exporter to Canada, sending about 0.5 Bcf/d across the border late last week, and about 0.1 Bcf yesterday.

Highlights:

  • Natural gas spot prices increased at virtually all spot market locations this report week (Wednesday, March 9, to Wednesday, March 16). The Henry Hub spot price rose during the report week from $1.57 per million British thermal unit (MMBtu) to $1.74 yesterday.
  • At the New York Mercantile Exchange (Nymex), the price of the near-month (April 2016) contract rose from $1.752/MMBtu last Wednesday to $1.868/MMBtu yesterday.
  • Net withdrawals from storage totaled 1 billion cubic feet (Bcf) for the week ending March 11. Working gas stocks are 2,478 Bcf — 67.4 per cent and 48.3 per cent above the year-ago and five-year (2011-15) average levels, respectively.
  • The Baker Hughes rotary rig count fell for the twelfth week in a row. For the week ending March 11, gas-directed rigs decreased by 3 to 94, and oil-directed rigs decreased by 6 to 386. The total rig count fell by a total of 9, and now stands at 480.
  • The natural gas plant liquids (NGPL) composite price at Mont Belvieu, Texas, increased by 41¢ to $4.58/MMBtu for the week ending Friday, March 11. The spot prices of all natural gas liquids at Mont Belvieu increased this week, with ethane rising by 19.1 per cent, propane rising by 9.6 per cent, butane rising by 4.4 per cent, isobutane rising by 5.9 per cent, and natural gasoline rising by 7.7 per cent. These increases likely stem from the recent rise in the price of crude oil.

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