Although there have been few if any formal announcements about increases in exploration and capital spending, there has been a 12% increase in the rig count since it bottomed out a little more than a month ago and producers probably won’t wait much longer to take advantage of a 12-month gas futures strip that is hovering over $4/MMBtu, Raymond James & Associates said in an equity research note.

“It appears that operators are keeping their capital spending plans close to the vest in an effort to delay the inevitable — increase in oilfield costs,” Raymond James analysts said. “However given the accelerating declines in U.S. natural gas production over the past three quarters, it seems only a matter of time before drilling explodes again in order to try to right the ship…”

On Friday, Baker Hughes reported that there were 927 active rotary rigs drilling in North America, 28 more than the week prior. The U.S. total of 829 was up 17 from the prior week. Canada was up 11 to 98, and total gas rigs were up 27 to 696 compared to 992 a year ago.

Raymond James forecasts a rapid increase in drilling with the total rig count rising to nearly 1,100 rigs by October and reaching 1,200 by October 2003. The analysts also predict continuing increases in natural gas prices with $6/Mcf Henry Hub prices next winter and nearly $7 in winter 2003.

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