The U.S. natural gas rig count, steady for about two years, is down 100 rigs in the past six months and should continue to deteriorate over the next few years, Raymond James & Associates Inc. said Monday.

Gas-related activity is falling faster than expected while oil activity is not slowing down, said analyst J. Marshall Adkins.

The total domestic onshore rig count is expected to thrive through 2012, he said. Raymond James, which issued a U.S. rig count forecast last September, increased the 2011 oil and gas rig count forecast to 1,801, which is 3% higher.

“This represents a year/year (y/y) oil rig increase of 337 rigs (or 57%) and a y/y gas rig decline of 78 rigs (or 8%),” Adkins wrote. In 2012 the rig count is expected to jump 9% from 2011 to 1,970, which includes 1,191 oil rigs (up 28% y/y).

“Our new 2011 gas rig count forecast is down 65 rigs (or 8%) to 865, and our new 2012 gas rig count forecast is now down 11% y/y to 772 rigs,” Adkins wrote. “Gas supply is growing too fast with 800 rigs.”

Until recently the U.S. gas rig count had remained “stubbornly high,” and in fact had peaked at almost 1,000 rigs in late 2010, he noted. However, in the past six months around 100 gas rigs have been taken down; the count now sits at around 885.

Producers are dropping gas rigs in both horizontal and vertical plays — except the Marcellus and Eagle Ford shales, he said.

According to a Raymond James analysis, around 75-100 gas rigs have been dropped in the past six months in dry gas shale basins, partially offset by the 50 total rigs added to the Marcellus and Eagle Ford plays.

The Marcellus Shale’s close proximity to the “premium Northeast market makes the play very economical in a $4.00/Mcf gas world,” while the Eagle Ford has a “strong liquid content,” making it more dependent on oil prices, Adkins noted.

“Since the start of 2010 these plays have jumped from 100 rigs to 250 rigs, a 150-rig increase…Going forward these two plays will find it much easier to add incremental rigs than the older plays will be able to shed them.” The “principal constraint will be rig supply.”

Notably, the rig count in “legacy” shale plays, like the Barnett and the Haynesville, now appears to have “stabilized over the past few months at around 120 rigs,” which is only 30 rigs off the high, said Adkins.

Although the gas rig count is expected to continue to decline, the same cannot be said for the onshore oil rig count, which “is poised to grow faster than market expectations.”

The oil-related activity is expected to continue for the “next several years. In just the past six months the U.S. oil rig count spiked 200 rigs to nearly 900 (up 30%),” said the analyst. “High oil prices and improved recovery technologies are driving increased activity in oil plays everywhere.”

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