The number of rigs actively exploring for natural gas and oil continues to slow, with the U.S. rig count flat at 1,941 as of Friday after losing a record 51 rigs the week before. Canada operators laid down another 18 rigs last week, Baker Hughes Inc. reported Friday.

Most of the rigs lost are in Texas, which dropped to 885 on Friday from 922 in operation just three weeks ago. New Mexico’s rig count also has taken a big hit this month, falling to 74 on Friday from 92. Louisiana, which lost 12 rigs two weeks ago, is at 192 rigs, and Oklahoma is down five rigs since the start of the month to 195. Canada, which began November with 445 rigs in operation, now has 400 in operation.

In reality, one might think it’s a “glass half full or half empty” dilemma. North America had 2,341 total rigs in operation as of Friday, which is 177 more than at the same time in 2007. The United States is running 1,941 rigs; at this time a year ago, there were 1,773 rigs in operation. There were 1,511 gas rigs in operation, 419 oil rigs and 11 were listed as “miscellaneous.”

However, as gas prices have fallen and the financial markets have remained perilous territory for borrowers, the rig count is a sign of what may be ahead for gas supplies in the coming months. Producers had been developing gas-prone regions of the country at a furious pace, but that is all beginning to change (see related story).

Barclays Capital last week cut its price target for 30 oil service and drilling companies on a forecast for a drop in worldwide exploration and production spending. Barclays analysts reduced their forecast for 2009 average U.S. gas prices to $6.50/Mcf from $7, and cut the oil price forecast to $60/bbl from $70 on the deteriorating outlook.

“We believe there is considerably more bad news to come in the sector in the form of rig count reductions and earnings deterioration,” Barclays said in a note to clients. The brokerage now expects to see flat exploration and production spending worldwide in 2009 — with a 29% drop in North America. Barclays expects the U.S. rig count to fall to 1,500 or fewer by May because of lower gas prices and a lack of available financing because of the credit crunch.

Canada’s First Energy Capital agrees with Barclays that the U.S. rig count will continue to fall over the coming months.

“Many of these companies are not only doing this due to a decline in commodity prices, but also because of the lack of capital in the system,” First Energy’s Kevin Lo noted. “From a high of 1,606 gas rigs in August of this year, the number could fall to 1,200 to 1,400.”

A rally in gas prices remains “highly dependent on a long, cold winter,” Lo wrote.

“The large drop in the U.S. rig counts suggests an eventual reduction in natural gas production is pending,” Lo said. “This sets the stage for the downward rebalancing of supply in natural gas.”

Texas and Louisiana, where most of the rigs have been idled, are the “two areas that have been drilling heavily for unconventional natural gas, which has been the growth engine for the Lower 48,” Lo noted.

According to First Energy Capital, there have been only two times since 2000 when the U.S. rig count has fallen as quickly as it did two weeks ago: in January, when 41 rigs were dropped in one week; and in November 2001, when the count dropped by 40 rigs in one week.

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