U.S. Active Rig Count - June 12

[dan_s]

Baker Hughes reported another drop in the active rig count.

Total U.S. rig count down another 9 rigs to 859.

The number of rigs drilling for oil is down 7 to 635, compares to 1,609 in early October, 2014.

It takes approximately six months before a decline in active rig count is reflected in production. We are just in the first inning of when we'd expect to see a decline in production. In my opinion, U.S. crude oil production will fall by more than 500,000 barrels per day from April to December. By the 4th quarter, I am expecting U.S. crude oil production to be falling by over 100,000 barrels per day month-after-month and it will take a massive effort to reverse the decline.

As I pointed out at our luncheon on Wednesday, U.S. natural gas is already on decline. The Texas Railroad Commission reported a 1.5 Bcf per day decline in Texas natural gas production from Q4 to Q1. The Barnett Shale, Eagle Ford, Permian Basin and Granite Wash (the four largest gas producing regions in Texas) are all on decline. My SWAG is that U.S. natural gas production will decline by at least 5 Bcfpd this year. In 2014 U.S. natural gas demand was 73.5 Bcf per day and demand is forecast to increase to over 75 Bcf per day this year. Keep in mind that the U.S. has limited import capability for gas and Canadian gas production is falling too.