The active rig count in the U.S. increased by +4 to 1141 for the week ended on Dec-4th. Canada increased by +47 to 364 and the international rig count dropped by -3 to 983.
The rig count for the U.S. at 1141 active rigs is down -711 from the same period in 2008. Canada is 40 rigs below 2008 and the international rig count is down -113.
The reason the U.S. is so far below other areas of the world is due to the massive spike in drilling for natural gas over the last three years. The rig count exploded to a high of 2031 in July of 2008 and then fell back to a low of 876 earlier this year. This is far below the 1981 high for active rigs of 4,530. Rigs fell to a low of 596 in 1992. After a brief recovery into the low thousand range in 1998 the cheap oil from OPEC crushed the U.S. drilling sector and rig counts fell to a multi decade low of 488 in mid 1999.
The only reason the U.S. has added active rigs for the last seven weeks is the expectations for higher natural gas prices 18-24 months from now. The shale gas boom has lasted for several years and the early wells have depleted to the point where they are a drag on production and will need to be replaced with new production within two years.
We currently have a glut of natural gas from those shale plays and that glut is expected to last until 2012 but Goldman Sachs does expect gas prices to rise in 2010 to $6.50 per thousand BTU. Current gas exploration produces gas with a higher overall cost and this will have to be factored into future prices by curtailments until the prices rise.