What Caused the US Rig Count Fall Last Week?
(Continued from Prior Part)
US natural gas rig count
In the United States, there were 196 natural gas rigs operating in the week ended September 11, six less than the previous week. In the past 12 weeks, natural gas rigs declined seven times. The following part of this series discusses the key shales where natural gas rigs were most affected last week.
Since the beginning of this year, the number of natural gas rigs in operation fell by 132. The four-week average reduction in the natural gas rig count was four for the week ended September 11.
In comparison, the four-week average decrease was three for the week ended September 4. Four-week averages give a smoother view of this trend that otherwise can be quite volatile on a weekly basis. So, natural gas rigs seem to be back in a declining trend again.
What does this mean?
The smoothed rate of fall in natural gas rigs is accelerating. It suggests that natural gas producers like CONSOL Energy (CNX), Southwestern Energy (SWN), Linn Energy (LINE), WPX Energy (WPX), and Pioneer Natural Resources (PXD) are reducing their drilling activities. This hints at the potential of lower production in the future. In comparison, a rise in the number of rigs in operation indicates a potential increase in production. WPX Energy accounts for 0.13% of the iShares US Energy ETF (IYE).
MLPs specializing in natural gas storage and transportation activities such as AmeriGas Partners (APU), DCP Midstream Partners (DPM), and ONEOK Partners (OKS) could be affected negatively if natural gas production falls.
Historical perspective
Natural gas rigs have been on a downward trend for about four years. The number of active natural gas rigs also fell over the last 12 months. A year ago, there were 338 natural gas rigs in operation. Currently, there are 196 active rigs. That’s a fall of 142 rigs, or ~42%. At this level, the natural gas rig count is at its lowest since July 1997, according to Baker Hughes’ records.
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