Friday, May 22, 2009

Rig Counts Mixed; Gas Price DOWN

U.S. rig counts are down by 18 to 900 this week. Baker Hughes reports that the number is down 989 from last year. In the Haynesville region of North Louisiana and East Texas, the number of rigs was down by three (down four in N. LA, up one in E. TX). The drop in LA brought the number down to 75, which is where it had been for the previous two weeks before last week's increase, so it's not all bad.

What is bad is the plummeting price of natural gas. Gas had been on the rise for a couple of weeks. Yesterday, futures got crushed, down 9.2%, and they were down another 2.6% today. The spot price was down 9% to $3.42, a price I had hoped was firmly in our rear view mirror. Apparently an increase in demand has not materialized as expected.

I read an article in the Wall Street Journal about futures prices and it noted that even though rig count has dropped "producers have struggled to rein in production." Companies like XTO and Petrohawk had drilled some serious gushers, so their production figures haven't dropped alongside rig counts. In other words, these companies and the natural gas industry are getting punished for success! Crazy world.

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