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U.S. Drops Three Natural Gas Rigs, Oil Down Too

Three natural gas rigs packed up shop in the United States for the week ended Friday as overall domestic drilling activity pulled back, according to data from Baker Hughes Inc. (BHI).

The United States ended the week at 1,044 rigs, with two oil rigs exiting the patch along with the three natural gas-directed units, while one “miscellaneous” rig was added, according to BHI. Last year, the number of active U.S. stood at 954, though the domestic count has shown little growth over the last few months.

Five land rigs packed up for the week, while one went to work in the Gulf of Mexico. Six vertical units were added, while 10 horizontal units packed up, according to BHI.

The Canadian rig count finished flat week/week (w/w) at 223 units, up slightly from 217 a year ago. The combined North American count fell w/w to 1,267, but still up from 1,171 at this time last year.

Among plays, the largest decline for the week occurred in the Cana Woodford, which saw three rigs exit to finish at 68 (60 a year ago). Two rigs left the STACK (aka the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties), while one exited the SCOOP (aka the South Central Oklahoma Oil Province), according to a more detailed breakdown by NGI’s Shale Daily.

Meanwhile, the Marcellus saw two net rigs pack up for the week to end at 53 (46 a year ago). The declines appeared to be focused in West Virginia, where three rigs departed w/w, while Pennsylvania gained one net rig, according to BHI.

Also among plays, the Williston Basin in North Dakota gave up a rig w/w to finish at 57, slightly ahead of its year-ago tally of 53. The Granite Wash added two rigs to end at 16 (15 a year ago).

Among states, Colorado and New Mexico each dropped two rigs from their respective tallies, while Alaska dropped one. Besides Pennsylvania, gainers among states included Wyoming, which added two rigs to its total, and Louisiana, which added one.

The pull back in the U.S. rig count comes as the industry faces uncertainty from an escalating trade war, including an announcement from China that it plans to levy tariffs of up to 25% on $60 billion in U.S. products, including liquefied natural gas (LNG) exports.

"This move by the Chinese to add LNG to the list of possible retaliatory tariffs is an unwelcome but not wholly unexpected development," said LNG Allies CEO Fred Hutchison. "It is imperative that the United States and China begin serious, high-level negotiations to resolve the complicated issues --which, by the way, are wholly unrelated to energy -- that lie beneath the current tariff dispute."

Center for LNG Executive Director Charlie Riedl concurred. "Tariffs, as we have said many times, are bad for consumers and producers alike," he said. "The administration's 'energy dominance' and 'new energy realism' agendas will cease to exist if one of the largest energy markets in the world is preemptively placing tariffs on LNG."

Riedl said China has imported more than 185 Bcf of natural gas from the United States to date and is currently the third-largest buyer of U.S. LNG. He added that China has a growing appetite for LNG and is on track to become the world's largest importer.

"Should these tariffs remain, China will source the LNG from other suppliers eager to fill the gap," Riedl said. "This would be a tremendous missed opportunity and would have very real effects on the U.S. LNG industry."

 

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