Baker Hughes Report Suggests Increasing Importance of Natural Gas

Michael Teague  |

The number of rigs drilling for energy resources in the US increased just barely with one new platform added this week, according to the oilfield services firm Baker Hughes (BHI) .

But this overall number conceals ongoing changes in the landscape of US oil exploration. A closer look at the numbers shows oil rigs down by four to 1,361, while rigs drilling for gas increased by seven, to 401.

Rig counts overall have declined over the past year by 96, partially the result of increased drilling efficiency, as well as the rise in direction wells that can drill from multiple angles, providing support to higher production levels and oil prices in 2013.

But the drop in rigs drilling specifically for crude, and the concurrent rise in gas rigs can be seen as an indicator of the rising importance of natural gas for the US energy economy. The first week of September saw oil output up 124,000 barrels per day to 7.75 million, which according to the US Energy Information Administration is the highest rate since 1989. But natural gas slated for October delivery is now going for $3.67 per BTU (British thermal unit), a 21 percent increase on the same time one year ago. The EIA also said that gas reserves, up 65 billion cubic feet last week, are still 5 percent below last year, suggesting that demand is more than adequately keeping up with supply.

While natural gas is not likely to “take over” from crude any time soon, there has been a noticeable increase in gas exploration and drilling as recent discoveries of huge shale reserves throughout the US make the resource more available.

A number of oil and gas drillers saw shares higher in midday trading as a result of the news, including ConocoPhillips (COP) , up nearly a percent to $69.37, Patterson-UTI Energy Inc. (PTEN) , up 1.75 percent to $20.75, and Helmerich & Payne Inc. (HP) , up 3.7 percent to $69.

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