Natural Gas Rigs Decline in Key Areas
Active natural gas rotary rigs currently total 594, according to the latest weekly data released by Baker Hughes Incorporated. According to Baker Hughes data, natural gas-directed horizontal rigs have driven the decline in total natural gas rigs over the past several months. Horizontal-directed natural gas rig counts have fallen to 411, from levels in the low-600s a year ago.
Declines have occurred in key areas of dry shale gas production, particularly in Louisiana, where the Haynesville Shale is located. The number of horizontal natural gas rigs drilling in Louisiana has fallen from 110 at the beginning of 2011 to 30 last week, according to Baker Hughes data. -Over the same time period, directional and vertical natural gas rig counts have remained relatively unchanged, and totaled 26 and 19, respectively, as of May 25. Other states that have seen significant declines in natural gas rigs include Texas and Oklahoma.
Movement in the Henry Hub day-ahead price reflected an overall decline in this week’s cash market prices, falling 8.1 percent, from $2.60 per MMBtu last Wednesday to $2.39 per MMBtu yesterday. Prices at most trading points across the country initially increased, with average gains last Thursday in the 7 cent per MMBtu range. The gains were quickly given up on Friday as prices began an overall decline that continued through the remainder of the report week. The Henry Hub price increased to $2.67 per MMBtu on Thursday, retreated to $2.56 per MMBtu on Friday, and subsequently continued the downward slide for the remainder of the week.
At the NYMEX, the June 2012 contract expired on Tuesday at $2.429 per MMBtu, down 30.8 cents (11.3 percent) from $2.737 per MMBtu last Wednesday. The 12-Month Strip (average of the June 2012 through May 2013 contracts) also declined, losing 22.7 cents (7.1 percent) over the week to close at $2.961 per MMBtu. The July contract, which moved into the near-month position yesterday, lost 13.5 percent over the week, declining from $2.796 per MMBtu last Wednesday to $2.418 per MMBtu yesterday.
Despite a 3.5 percent increase in consumption over the week, nearly all downstream trading locations closed the week lower. Spot prices at Transcontinental Pipeline’s Zone 6 trading point for delivery into New York City, which started the week at $2.77 per MMBtu, closed yesterday at $2.59 per MMBtu, down 18 cents per MMBtu (6.5 percent) over the week. The Chicago citygate spot price registered a 15-cent (5.7 percent) per MMBtu decline, starting the week at $2.62 per MMBtu last Wednesday and ending the week at $2.47 per MMBtu yesterday. The Algonquin city gate price for delivery into Boston closed the week with a 13 cent (4.6 percent) per MMBtu decline. The Algonquin city gate pricing point started the week at $2.83 per MMBtu, jumped 11 cents on Thursday to $2.94 per MMBtu, declined to $2.80 per MMBtu on Friday, and continued the slide for the remainder of the week.