2012-06-22

2012 June 22

The Master Resource Report  2012-06-22

Gas rig count falls again

According to data released by Baker Hughes today the number of rigs drilling for natural gas in the U.S. fell by 21 to only 541. To give some perspective that is down 38 percent from one year ago when the number of natural gas rigs drilling was 873.

Further perspective on just how much the rig activity in the U.S. can swing consider the change from the level of drilling for gas in the summer of 2008 when it was 1,606 during the first weeks of September. That means today only one-third as many rigs are drilling for gas compared to the peak in 2008 when the shale boom was taking off.

At that time only 20% of the rigs drilling the U.S. were searching for oil while 80% were on a quest for natural gas. Today that relationship has reversed with 27% drilling for gas and 73% drilling for oil.

These shifts result in a couple of questions. The first concerns whether the gas rig count has now swung too far and when will the massive shift show up in supply. The second concerns the equally massive shift to liquids drilling and the large production flows overwhelming the transport infrastructure. Are liquids headed for the same cliff that natural gas went over?

Since many of the natural gas producers were counting on liquids to compensate for the market price of gas being below production cost the news on liquids couldn’t come at a worse time. So to put it simply the oil and gas business appears to have gone down the same boom/bust road it always travels. What happens at the end of that road will probably look the same as well. Make sure you have your seatbelt on.

25 hour day

There will be no Master Resource report this week. Work and life conspired to require me to have a 25 hour day to get it done. Even though yesterday was the longest day of the year I needed more than just more daylight. The report will be back next week.

Thank you for your support and understanding.