Baker Hughes: US Oil, Gas Rig Count Up 20 to 1,427 This Week

HOUSTON (Dow Jones), Mar. 19, 2010

The number of rigs drilling for oil and gas in the U.S. climbed this week as producers ramped up drilling activity despite sagging natural gas prices.

The number of oil and gas rigs climbed to 1,427, up 20 rigs from the previous week, according to data from oilfield-services company Baker Hughes Inc. (BHI). The number of gas rigs was 939, up 12 rigs from last week, while the oil rig count was 474, an increase of eight rigs. The number of miscellaneous rigs was unchanged at 14 rigs.

The number of gas rigs in use peaked at 1,606 in September 2008. Gas producers began scaling back drilling activity as gas prices plunged from their 2008 summer highs above $13 a million British thermal units. But they began putting more rigs back to work as winter heating demand boosted prices. Prices, however, have now slipped as spring approaches and the market anticipates rising production.

U.S. gas inventories climbed to an all-time high last November as producers unlocked vast new supplies of the fuel from prolific onshore natural gas fields known as shales and the economic downturn undermined demand.

Natural gas for April delivery on the New York Mercantile Exchange was recently up 3.5 cents, or 0.86%, at $4.12 a million British thermal units. The front-month contract sank to $4.05/MMBtu in earlier trading--the lowest intraday level in nearly six months.

"We're not believers that gas price is sustainable this low but rig count strength is a real overhang on both gassy stocks and natural gas prices right now," analysts with the Houston-based energy investment bank Tudor Pickering Holt & Co. wrote in a note to clients on Friday.

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