First natural gas rig of 2016 comes online in Fayetteville Shale Play, U.S. rig count up by 11

by Wesley Brown ([email protected]) 426 views 

For the first time since the end of 2015, a natural drilling rig in Arkansas is up and running in the Fayetteville Shale play as natural gas futures bounced around $3 per million British Thermal units over the past week.

According to Baker Hughes’ weekly oil rig count released Friday (Sept. 30), the commodity-driven oil and gas industry got a boost this week number of rigs in operation rose by 11 to end the week at 522. The oil rig count rose by a robust 7 to 425, while the number of natural gas rotary rigs increased by 4 to 96, and miscellaneous rigs unchanged at 1.

The number of drilling rigs in Arkansas peaked at 60 on July 11, 2008, when Fayetteville Shale development was in full swing, Baker Hughes statistics show.

For the year, the U.S. rig count is still down 64.5% to 287 rigs, from 809 in the same week a year ago.  Oil rigs have declined by 198, gas rigs are down 99, and miscellaneous rigs up by 1.

Although the Baker Hughes data does not provide the actual operator of the new rig that came online in the Fayetteville Shale play, Houston-based Southwestern Energy said in late July that it planned to bring back hire and bring back some laid off workers to the Arkansas natural gas development under the company’s “renewed” $500 million capital program.

In an investor presentation in August, the Fayetteville Shale leader said it planned to drill 7 to 10 wells and complete 36 to 39 wells in the second half of 2016. That improved guidance called for one new rig and a healthy $73 million in capital spend in the Arkansas shale play.

While the Fayetteville Shale is not likely to see capital spending levels that brought billions of dollars in new capital into Arkansas during the height of production only a few years ago, it does mean the company is continuing to develop the Arkansas play over the long-term. For instance, Southwestern’s plans show it will increase production to 500 drilling locations if the price of natural gas moves to $3 per MMbtu. If prices move to $4 or higher, then Southwestern is prepared to adjust its production level up to as many as 4,300 drilling locations.

Natural gas prices for November delivery declined 4.3 cents, or 1.43%, to $2.959 per MMBtu on the New York Mercantile Exchange in Thursday’s session. Prices have fluctuated around the $3 level over the past few week as natural gas inventories rose by 49 billion cubic feet to 3.6 trillion cubic feet, according to the U.S. Energy Information Administration.

In Southwestern forecast is true and recent drilling permits from the Arkansas Oil and Gas Commission are any indication, the first rig to come online in 2016 is likely tied to the Houston-based oil and driller. Southwestern mothballed in drilling operations just before Christmas of the lasts year, and a decision in January to lay off 600 oilfield workers in Arkansas and a total of 1,100 companywide.

At the end of fiscal 2015, the Southwestern owned 958,000 net acres and had 3,724 producing operated horizontal in the Arkansas shale play that had proved reserves of 3.3 trillion cubic feet.