RE: Boom..... -207!"This has to mean that the 50% drop in the rig count is finally putting a dent into the supply coming on market"
I don't think that's as big an issue as it would seem........let me explain: On the surface, it would appear logical, and when you hear the stat that NG rigs are down 45% on the year certainly sounds like a lot.....but if we take a closer look, it isn't as signicant as it would first appear.
For starter's, that stat lumps both directional and horizontal drilling into one, when they clearly are not. Horizontal wells are around 400% more efficient, meaning they pump about 400% more gas. So we must lose 4 directional rigs to equal (roughly) 1 horizontal rig.
And when we look at the breakdown of rig declines, we can see that while directional rigs are down 45%, horizontal is only down 9.7%.
To put some numbers on it (and I'm using the newest rig numbers found here https://www.wtrg.com/rotaryrigs.html) let's compare to say, a year ago, when Nat Gas rigs where at 967 (compared with 757 now).
In Dec/08, there were 967 rigs: 349 directional, and 618 horizontal.....if we assign a value of '1' (for this scenario, the value will be represented as 'x') to represent the production capacity of ONE directional rig, and we multiply each horizontal rig by '4' to represent the 400% more production power then directional rigs, we get a total production value for those rigs of roughly 2821(x).
No fast forward to today, and the rig count is 191 directional and 558 horizontal, giving us a production value of 2423(x).......which means that even though the rig count has fallen by 45%, the actual PRODUCTION capacity of those rigs (which is obviosuly the real number of importance) has only fallen by about 16%. Sure, that's significant, but it is either all or mostly offset by the demand destruction that's happened over the last year.
Also, rig counts have been risings pretty consistantly since July.....so even if we are now starting to feel the effects of the diminished righ counts, considering they've been rising for 6 months, I wouldn't expect that factor to be overly significant in the coming weeks and months.