Although there have been few if any formal announcements about increases in exploration and capital spending, there has been a huge increase in the rig count since it bottomed out a little more than a month ago, indicating producers probably aren’t waiting around to take advantage of a favorable 12-month gas futures strip, 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 993 active rotary rigs drilling in North America, 66 more than the week prior. The U.S. total of 859 was up 30 from the prior week. Canada jumped by 36 rigs to 134, and total gas rigs were up 29 to 725 compared to 1,030 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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