Lehman Brothers Analyst Thomas Driscoll said an “exhaustive analysis” of mergers and acquisitions among 47 large producers, who account for about 70% of domestic production, led him to conclude that production rose 1.5-1.6% over the past six months. A continuation of the first-half trends will lead to 3-3.5% year-to-year production growth by the end of the fourth quarter, Driscoll said. However, the significant decline in prices probably will have an impact on drilling in the second half of the year.

Reported dry gas production rose 0.1% in the second quarter, while natural gas liquids production rose an estimated 12.1%, Driscoll said. “Strong gas prices in [the first quarter] led to decreased gas liquids production and this depressed reported gas sales. Most of the impact of decreased gas liquids production was in Q1 and [was] reversed in Q2 and as a result reported Q2 ‘gas’ sales understate the change in wellhead gas production from Q1.” Wellhead gas production, including liquids actually rose 0.5%.

The major shift in the rig count last year has led to a turn-around in production decline rates. However, the change has been something less than dramatic. Furthermore, according to Lehman Brothers Analyst Angeline Sedita the decline in prices already is beginning to have an impact in Gulf Coast and Gulf of Mexico drilling. The number of rigs operating offshore has declined to the 140s from the 170 earlier in the year. The number of gas rigs last week stood at 116, which was down from 130 in May, according to Baker Hughes. Dayrates for drilling rigs have fallen sharply but still have not hit bottom, said Sedita.

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