Gas rigs climbed by two to 340, the most since March, data posted on Baker Hughes Inc. (BHI)’s website today show. The oil count jumped by nine to 1,584, the Houston-based field services company said. Total rigs rose to the highest since August 2012.
Rigs drilling for gas are rising from a 21-year low as pipeline capacity to carry the fuel out of fields such as the Marcellus formation in the eastern U.S. rises amid higher futures prices. The rebound is abating a switch to more profitable oil plays that has persisted for the last decade as drillers use hydraulic fracturing and horizontal drilling to draw record volumes of crude from U.S. shale formations.
“We can safely say now that we’ve seen the bottom in the gas rig count, and I’d imagine we’ll go up to 350 rigs if prices rise, and maybe even if they don’t,” James Williams, president of WTRG Economics, said by telephone from London, Arkansas.
The total rig count has almost doubled from five years ago amid booming production in shale formations from North Dakota to Texas. The increase has raised domestic crude production to the highest level in 28 years, shrinking imports to the U.S.
About 100 rigs drilling horizontally have been added in major plays such as the Permian Basin in Texas and New Mexico and the Utica shale of the eastern U.S. since the beginning of the year, “and we expect activity to increase further in coming quarters,” Alberta-based investment dealer Peters & Co. Ltd said in an e-mailed research note Sept. 3, estimating that total rigs on U.S. land will reach about 1,850 this year.
Natural gas futures have climbed 6.1 percent in the past year, jumping 5.8 percent in August alone. Gas for October delivery fell 2.6 cents to settle at $3.793 per million British thermal units today on the New York Mercantile Exchange.
U.S. gas stockpiles rose 79 billion cubic feet to 2.709 trillion in the week ended Aug. 29, according to the Energy Information Administration.
The Marcellus formation added two rigs this week drilling horizontally for gas, boosting the count to 76, the highest since May, according to Baker Hughes data. The Mississippian in Kansas also gained two to four. A vertically drilling gas rig appeared in the oil-rich Permian Basin of Texas and New Mexico for the first time in four weeks.
The Williams Cos. Inc. (WMB) began on Sept. 3 to solicit interest in an expansion of the Transco interstate pipeline to deliver gas from the western Marcellus and Utica to as far south as Mississippi. Dominion Resources Inc. (D) was chosen this week to build a 550-mile gas line that would bring the fuel to North Carolina from the Utica and Marcellus.
Gas rigs made up 17.7 percent of the total U.S. count this week, the biggest share since March 21.
Oil production was little changed in the seven days ended Aug. 29 at 8.63 million barrels a day after rising a week earlier to the highest level since 1986, Energy Information Administration data show. Oil supplies dropped 905,000 barrels to 359.6 million.
West Texas Intermediate crude for October delivery fell $1.16, or 1.2 percent, to close at $93.29 a barrel on the Nymex, down 14 percent in the past year.
To contact the reporter on this story: Lynn Doan in San Francisco at [email protected]
*David Marino at [email protected]erg.net, Richard Stubbe, Stephen Cunningham