[ROCKMAN]

It's mostly due to the Marcellus Shale and the production capability of frac'd horizontal well bores. The NG rig count peaked in Dec 2008 at 1606 thanks to the surge in conventional and unconventional drilling due to high NG prices. The count has fallen 80% to 300 last week. At current prices there are very few conventional NG wells that can be justified.

The last time both oil and NG prices were at current levels the rig count was less than 800.

[Mick22]

So nobody drills for gas then? All biproduct players? Doesn't wash.

[Mick22]

It's mostly due to the Marcellus Shale and the production capability of frac'd horizontal well bores. The NG rig count peaked in Dec 2008 at 1606 thanks to the surge in conventional and unconventional drilling due to high NG prices. The count has fallen 80% to 300 last week. At current prices there are very few conventional NG wells that can be justified.

The last time both oil and NG prices were at current levels the rig count was less than 800.

They'll produce at a loss, because producing at a loss is better than going bankrupt. Cutting production is the same as going bankrupt, because cash pays the bills, even cash earned at a loss.

[ROCKMAN]

Mick - You need to read my post again. Apparently you've completely misunderstood what I said. What part of "It's mostly due to the Marcellus Shale..." did you not understand? Have you bothered to look at the actual numbers? They are readily available on the web: in 2007 the Marcellus Shale accounted for only 2% of US NG production. Today it's close to 20%. Do you comprehend how much 20% represents of total US NG production means? That's 20% of the largest NG producing country on the planet.

And after all the facts I've repeated posted I get this: "So nobody drills for gas then? All biproduct players? Doesn't wash.". It's as if you've read very little of all that has been posted here.

[GoghGoner]

So Marcellus had a high rig count of 143 in January, 2012 and are now at 69. I would think that we should see at least a plateau in that region by the summer but I have been wrong too many times (Rockman, you warned me about taking rig counts and making predictions a few years back but I just can't help myself).

I remember a presentation by CHK a few years ago that said if NG rigs dropped below 700 that production would fall in the US. Didn't happen so even the insiders got it wrong. Just because the wells have been so prolific the past couple of years does not mean that the economics support them or that they can keep hitting super sweet spots in Marcellus. It also doesn't mean what happened with NG will happen with oil. I would bet against that,too.

I'll be watching with interest...

[Subjectivist]

So Marcellus had a high rig count of 143 in January, 2012 and are now at 69. I would think that we should see at least a plateau in that region by the summer but I have been wrong too many times (Rockman, you warned me about taking rig counts and making predictions a few years back but I just can't help myself).

I remember a presentation by CHK a few years ago that said if NG rigs dropped below 700 that production would fall in the US. Didn't happen so even the insiders got it wrong. Just because the wells have been so prolific the past couple of years does not mean that the economics support them or that they can keep hitting super sweet spots in Marcellus. It also doesn't mean what happened with NG will happen with oil. I would bet against that,too.

I'll be watching with interest...

I suspect that if oil Fracking drilling is in a lull from low oil prices natural gas fracking will have to be ramped up to replace the associated gas we won't be getting from shale oil fields.

[shallow sand]

Mick22. Companies will continue to drill if they have the funds available to do so. That has been a big debate here, and elsewhere. Only the really big boys have the cash flow from other operations to drill the "shales" without big time borrowing.

I agree that public companies would rather grow production than conserve cash. However, they and their financiers do not want them to go bankrupt either. Also, it is still to be seen how much in new junk bond issues these companies will be able to float.

We may not get to find out what happens to these guys anytime soon, as it appears the middle east chaos may buy them some time. $70 WTI v. $45 WTI would make a big difference.

[ROCKMAN]

Goner – Actually according to the EIA

http://www.eia.gov/petroleum/drilling/pdf/marcellus.pdf

the MS rig count has been fairly flat for the last 2.5 years thru Feb 2015: about 105 rigs with a dip below 90 in early 2013. And during the last year the rate of increase in production from new wells per rig has improved a bit but nothing like the big gains between 2012 and the end of 2013. And that was after the rig count plunged from 140 to 110. That indicates probably longer laterals and better identification of the sweet spots.

The good news: production from new wells in the last year increased by 0.79 bcf/day. The bad news: production from older wells decreased 0.61 bcf/day. So despite some good drilling results in 2014 the net gain was only 0.17/bcf/day. That represents only a 1% increase in net production. So even if the rig count in the MS doesn’t drop it looks like the days of big production increases have passed. Now it looks like the drilling pace will have enough trouble just keeping the gross production from falling.

Time will tell but we may be at Peak MS…at least until NG prices increase significantly.

[GoghGoner]

I was looking at the Baker-Hughes rig counts. I wonder why the discrepancy, looks like EIA might be using average wells for the month of December for their last data point. Down another 13 rigs since then and the lowest amount since 2009 in that basin.

[ROCKMAN]

Goner - I suspect your number is more righter then mine. BHI stays rather current...the EIH takes their sweet time updating. If so it might indicate we have reached a peak in MS production.

[dashster]

Art Berman's current post takes a look at rig counts. He says that the drop off has been faster than during the 2008-2009 cutback. He projects 600,000 fewer barrels per day from Tight Oil by June 15, 2015.

[ROCKMAN]

dashter - He might be right but I suspect he's not taking into account how many wells were drilled in the last 6 months of 2014 whose production has yet to show up in the publicly available data base. By the end of 2015? That's a different subject.

[shallow sand]

Wonder why Berman doesn't differentiate between oil and gas rigs when he is examining oil only. We won't know June production till August and that will be incomplete.
I agree that end of 2015 will be lower absent a price spike this summer.

[ROCKMAN]

Shallow - I was wondering the same. For those not aware the huge drop from '08 to '09 was primarily led rigs drilling for NG and not oil. Comparing the two doesn't make sense IMHO. Additionally the NG rig count collapsed due to NG prices falling much further...more than 70%.

[GoghGoner]

600k! If that prediction was right, we wouldn't have to wait for the official statistics to come out since we would know right away from the inventories. If the stimulus in Asia and Europe firmed up demand that would probably cause the roof to come off oil prices.

[GoghGoner]

Side note. NG rigs were under 300 last week and at the lowest level since May, 1993. I have been waiting for a NG super spike for a few years...

[ROCKMAN]

Goner – Given that Henry Hub just dipped below $3/mcf I would be thrilled to see a 33% “spike”…back up to $4/mcf. LOL. Interesting stats here:

http://inflationdata.com/articles/infla ... as-prices/

Even though the well head price is down to a level seldom seen for the last 15 years, the 2012-13 markup (the difference between well head and residential price) was the highest seen since they began tracking that stat 1981.

[GoghGoner]

11 rigs dropped from Williston this week. 9 rigs from NG drilling taking that down to 280. BH counts go back to 1987 and this is within the lowest count in that history. EIA still expects NG production to increase the next 2 years.

Hoopla about rig counts. Lol!

http://www.bloomberg.com/news/articles/2015-02-27/us-oil-rigs-get-hammered-for-the-12th-week

Last week Bloomberg started tracking predictions made on Twitter using the hashtag #RigCountGuesses. The closest guess this week was from @GregorMacdonald:

[ROCKMAN]

Goner - Since I talk daily to the folks actually drilling it wouldn't be fair to compete with those just sketching curves. But two days ago I got a call from the largest drilling contractor in the country. Large in the sense that they have more drill rigs then all the other drillers COMBINED. They just laid down 30 rigs in west Texas. He called me looking for work...a company that has only drilled a few wells in the last year. I'll let him bid on my next well. Given what they had been charging the Eagle Ford operators I had not wasted time getting a bid from them before. But the dynamics have changes significantly...and continues to change.

[dashster]

Rig counts hit 5 year low