Part I of this series focused on the continual reduction of rigs exploring for natural gas in the domestic U.S. lower 48. All the while, commodity prices continue to surge upward with futures prices even higher. This second part will focus on the natural gas producers that will benefit from the surging prices and the potential that a great majority of the rigs needed to increase production are tied up with oil drilling.
As mentioned in Part I, the Baker Hughes (BHI) rig report on Friday showed an interesting divergence with the commodity markets. While natural gas has jumped some 60% in the past few months, the amount of rigs drilling for natural gas has plunged to lows not seen since 1999. In the last week, the natural gas rig count dropped another 15 to only 422. Last year, the count was 936.
Recently Forbes released an article describing the depletion curve in the Eagle Ford as higher than expected. Not only does this change the investment thesis on some of the shale plays, but it also dramatically changes the production rates and hence future inventory levels. In fact, Forbes is forecasting $8 gas this winter due to these factors.
Read the full article at Seeking Alpha.
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