Natural Gas Rigs Dampen the Turnaround in US Rigs
Crude Oil Rigs Finally Turn: Rigs Rise Twice in 2 Weeks
Natural gas rig count
In the US, there were 219 natural gas rigs operating in the week ending July 2—nine less than the previous week. After rising for two weeks, natural gas rigs fell last week.
The “other basins” rig category led the natural rig count fall with four fewer active rigs last week. The rigs in “other basins” are those in smaller basins or rigs that don’t fall within a specific geographic basin.
Since the beginning of this year, the number of natural gas rigs in operation fell by 109. However, natural gas rigs seem to have stabilized in the past two months. On average, one natural gas rig was idled in the four weeks ending July 2.
What does this mean?
A lower number of natural gas rigs in operation suggests that natural gas producers like CONSOL Energy (CNX), Southwestern Energy (SWN), Linn Energy (LINE), WPX Energy (WPX), and Pioneer Natural Resources (PXD) might be reducing their drilling activities. This could mean a fall in natural gas production growth. In contrast, a rise in the number of rigs in operation indicates a rise in production growth. This would be positive for these companies. WPX Energy accounts for 0.15% of the iShares U.S. Energy ETF (IYE).
MLPs (master limited partnerships) specializing in natural gas storage and transport activities like AmeriGas Partners (APU), DCP Midstream Partners (DPM), and ONEOK Partners (OKS) could benefit if natural gas production rises.
One-year comparisons
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 311 natural gas rigs in operation. Currently, there are 219 rigs. That’s a fall of 92 rigs, or ~30%.
Browse this series on Market Realist:
