Baker Hughes: US Oil, Gas Rig Count Up 12 to 1,113 This Week

HOUSTON (Dow Jones), Nov. 20, 2009

The number of rigs drilling for oil in the U.S. climbed this week, but the gas rig total slipped as producers curbed output in response to low prices.

The number of oil and gas rigs climbed to 1,113, up 12 rigs from the previous week, according to data from oil field services company Baker Hughes Inc. The number of gas rigs was 726, a decrease of two rigs from last week, while the oil rig count was 375, an increase of 14 rigs. The number of miscellaneous rigs was unchanged at 12 rigs.

The number of gas rigs in use peaked at 1,606 in September 2008. Producers have reduced natural gas drilling sharply over the past several months in response to falling prices, but the rig count has stabilized in recent weeks as producers lock in prices on future output and bet on colder winter weather and an economic recovery that would spur demand for the fuel.

The most substantial decline in the rig counts has occurred in vertical drilling. Those rigs are used to drill straight down into conventional oil and gas reservoirs. The number of vertical drilling rigs has fallen by about 58% over the last year. Horizontal rigs have dropped by less. Horizontal drilling has declined by 17% over the year as producers have continued to exploit prolific gas fields known as shales.

Gas production from shales has surged with new drilling technology that makes it easier to extract gas from dense rock formations. Shale formations, such as the Barnett Shale in Texas, have been largely credited with fueling a surge in domestic gas production. Producers must drill down to the rock, then horizontally through the formation, to break it apart and release the gas trapped within.

A boom in supplies from these fields and weak demand for the fuel resulting from the economic downturn have driven gas prices lower.

Natural gas prices have fallen by more than 65% from their summer 2008 highs above $13 per million British thermal units. Gas supplies, however, remain ample. Total gas in U.S. storage for the week ended Nov. 13 was a record 3.833 trillion cubic feet--10% above last year's level and 12% above the five-year average.

Natural gas for December delivery on the New York Mercantile Exchange was recently up 5.9 cents, or 1.36%, at $4.401 per million British thermal units.  

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