A Reuters article states that there will probably not be a rebound in demand for drilling rigs in the near future. This is due to a large number of wells that have been drilled but not fracked or completed, and a large number of wells that could be refracked. Natural Gas Intel has an article saying pretty much the same thing, but looking at it from a different direction.
Looks like the roughnecks who still have their jobs have a pretty decent chance of finishing out the year with a job.
This is big news. (If that link doesn’t take you to the full article at MDN, do a Google search for the article’s title.) PA’s DEP released production numbers for February, and total production as well as production across the board is down from January. EQT’s production data is absent, but even if EQT’s production doubles from January (which it won’t), production will still be down. I expect that the same thing is happening in other natural gas producing areas.
A reduction in production means a reduction in storage levels and a reduction in supply overall. This is a direct result of the dwindling rig count everyone has been talking about for months. This is also a direct result of low natural gas prices. I’ve heard talk that some companies have been cutting back production from currently producing wells because of said prices. Decreased production/supply should lead to an increase in price.
If and when prices start to go back up, we’ll see producers start to turn the spigots back on, and bring already drilled wells into production. I don’t expect a huge jump in prices. I also don’t expect to see many, if any, new rigs brought back to work. There is just too much supply from currently producing wells and potential supply from completed but non-producing wells to justify firing up those idled rigs. I expect that to happen about the beginning of 2016.
This isn’t the end of low gas prices, but it may be the beginning of the end.