The number of rigs activity exploring for natural gas in the United States continued to climb last week, marking the fifth week in a row for an uptick, said three oilfield service firms that keep track of U.S. drilling.

According to Baker Hughes Inc., 982 rigs were exploring for gas last week, which was three more than in the previous week. The oil rig count also jumped by 11 to 591. Twelve rigs were listed as "miscellaneous." RigData and Smith Bits also reported double-digit gains in the U.S. rig count last week.

In the same week a year ago, the gas rig count stood at 943, according to Baker Hughes. Gas drilling is at its highest level since February 2009, according to the oil services firm.

According to SunTrust Robinson Humphrey/the Gerdes Group (STRH), the total rig count across the "major U.S. shale plays" fell by one rig to 579 last week. The Barnett Shale added two rigs (3%) to have 70 rigs running, while in the Eagle Ford Shale three (4%) more rigs were added to bring the count to 75.

The Fayetteville Shale lost two (5%) rigs last week to 35 rigs, while in the Haynesville Shale two (2%) rigs were added to total 123 rigs, STRH said. The Marcellus Shale lost two (2%) of its rigs to now total 96, and the Woodford Shale lost four (8%) of its rigs; it now has 44 rigs in operation.

Louisiana, which with Texas is home to the massive Haynesville Shale, reported a total gain of eight rigs last week, the most in the country. North Dakota, home to part of the Bakken Shale, gained four rigs, while West Virginia gained three rigs; New Mexico, California, Colorado and Texas each added one new rig.

In Alaska, Arkansas, Oklahoma and Wyoming, the rig count was the same as the previous week. Pennsylvania, which holds some of the most prolific Marcellus Shale wells, lost two rigs. Horizontal drilling dropped by one rig to 858 rotary rigs; directional drilling increased by four rigs to 218. Offshore drilling also saw its rig count increase last week, with the number of rigs drilling federal leases offshore up by two to 14, all in the Gulf of Mexico (GOM).

Private exploration and production companies added 19 gas and oil rigs week/week, while publicly traded producers added 15 rigs, according to a review by Tudor, Pickering, Holt & Co. Inc. Encana Corp. added four rigs, the most among the public companies.

The "strongest regions" to add gas and oil rigs last week were West Texas/New Mexico, where 12 rigs were added, followed by the Rockies, which added nine rigs. The Northeast, which would include the Marcellus and Utica shales, added eight rigs.

In Texas, where oil and gas drilling leads the nation -- and where gas drilling has held sway for years -- it was crude oil drilling that lifted the most recent Texas Petro Index (TPI). Despite "persistent economic doubts," the index, which measures a group of upstream economic indicators, rose in June to 208 from a low in December 2009 of 188.2. It was the sixth straight month to show an increase, said petroleum economist Karr Ingham, who designed the TPI.

According to TPI, Texas' estimated gas output in June totaled 566.3 Bcf, which was down from a year ago by around 10.5%. Crude oil production totaled 32.4 bbl, which was 1% lower than in June 2009. However, the value of Texas-produced crude topped $2.3 billion, or around 9.6% higher than the year-ago period.

"Since June of 2009, oil patch employment has grown nearly 8%, the rig count is up more than 29% and drilling permit applications are up more than 55%," said Ingham. "When you look at the numbers, it is fairly plain to see the TPI is being driven more by oil-directed activity in Texas than natural gas activity.

"Considering that these increases have been accomplished in a worrisome economy raises the question of what prices and levels of activity would be in a better economy. Certainly, natural gas would rise in a better economy as well."

According to the TPI, oil well completions this year through June totaled 2,819, a 19.4% decline compared with the first six months of 2009. Gas well completions in through June totaled 2,250, down almost 61% from the first half of 2009.

For "virtually all of the past decade," gas well completions outpaced crude oil well completions, according to Ingham. However, crude oil well completions now surpass gas wells.

The pace of U.S. and global economic recovery will be the primary driver of the TPI for the balance of 2010 and through 2011," said Ingham.

"Are we going to have a strengthening economy that is sufficient to support higher oil and gas prices?" he asked. "If so, oil and gas activity in Texas is likely to continue expanding and take the Petro Index along for the ride. Or will continuing economic weakness keep crude oil prices in the $70-$80/bbl range and natural gas prices between $4 and $5/Mcf and cause the Petro Index to begin to level out?"

According to Ingham, "essentially every energy proposal by the Obama administration -- from carbon tax to cap-and-trade to tax policies in the proposed budget -- would have the ultimate outcome of reducing the supply of petroleum products to the marketplace. That not only would be a bad outcome for the industry, it would be a bad outcome for consumers because it would ultimately raise energy prices."

The number of Texans employed in the state's oil and gas industry totaled 203,800, about 14,800 more than in June 2009, according to the Texas Workforce Commission.

Meanwhile, North Dakota continues to set drilling records, according to Lynn Helms, who directs the state's Department of Mineral Resources (DMR). In the latest "Director's Cut," Helms reported that in May the estimated 155 oil companies drilling in the Williston Basin produced 9.189 million bbl, the most in one month since the first commercial well was drilled in 1951 near Tioga, ND. By comparison, April's production was 8.53 million bbl.

Natural gas, considered a byproduct of oil drilling in North Dakota, also is being produced at record rates, said Helms. According to DMR, 9.28 MMcf was produced in May, based on a daily average production of 299,275 Mcf/d, which was a record.

Low gas prices and the GOM deepwater explosion make North Dakota's oil drilling more attractive and "are pushing our rig count higher than it would normally be at current prices," he said.

However, if gas prices rise, Helms said he expects to see a shift toward more gas drilling, not only in North Dakota but across areas that have moved toward more oil exploration.

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