He e-mailed me the following charts: historical natural gas production and rig count. As you can see the number of rigs have plummeted while production has held up. How is this?
First, by definition the Baker Hughes counts drilling rigs - these are rigs that are in drilling stage and not yet in production. Think of these as future production indicator. Another way of think of is this: if rig count fell to zero then nat gas production should fall at a natural rate of depletion (wells lose productivity as more and more gas sucked out), which is estimated at around 30% a year.
Say if we started 2009 production at 60Bcf/day and there was 0 rig count throughout the year by end of 2009 production would stand at around 42Bcf/day.
BAKEGAS Index
DOEGPROD Index
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