UPDATE 1-U.S. natgas rig count slips to new 18-yr low-Baker Hughes

Fri May 10, 2013 1:31pm EDT
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* Gas-directed rig count hits lowest since June 1995
    * Horizontal rigs climbs for second straight week
    * Oil rig count up for sixth time in seven weeks

    NEW YORK, May 10 (Reuters) - The number of rigs drilling for
natural gas in the United States fell this week for the third
straight week, hitting its lowest level in nearly 18 years as
producers continued to pull back from dry gas drilling.
    The gas-directed rig count slid by four this week to 350,
its lowest since June 1995, when the count stood at 340, data
from Houston-based Baker Hughes showed on Friday.
    Producers have mostly been curbing dry-gas drilling in favor
of more profitable oil and liquids-rich plays such as Eagle Ford
in Texas and Marcellus in Appalachia.
    But the 40 percent run-up in spot gas prices since
mid-February to a 21-month high of $4.444 per million British
thermal units just last week, had stirred concerns that gas
output, still flowing at or near record highs, could increase in
coming weeks. Prices have since slipped to the $3.90s.

    The oil-focused rig count rose for the sixth time in seven
weeks, climbing by nine to an eight-month high of 1,412, Baker
Hughes data showed. The oil count is up 40 rigs, or 2.9 percent,
from the same week last year.
    Baker Hughes also reported that horizontal rigs, the type
often used to extract oil or gas from shale, gained seven this
week to 1,099. The horizontal count is still down 7.9 percent
from the record high of 1,193 set last May.
    Drilling for natural gas has mostly been in decline for the
last 18 months. The count is down about 63 percent since peaking
in 2011 at 936, but so far production has not slowed much, if at
all, from the record high hit last year.
    The associated gas produced from more profitable shale oil
and shale gas liquids wells has kept dry gas flowing at a brisk
    On Tuesday, the U.S. Energy Information Administration
raised its estimate for domestic natural gas production in 2013,
expecting output this year to be up about 1 percent from last
year. If realized, it would be the third straight year of record
    Gas futures prices, which were down about 5.8 cents in the 
$3.925 area just before the Baker Hughes data was released, were
little changed from that level after the report.