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The variety of rigs deployed to drill for pure fuel in the US decreased over the past two years. U.S. pure gas-directed rigs decreased 32% (50 rigs) between December 2022 and December 2024. This decline has been concentrated within the pure gas-rich Haynesville and Appalachia areas, the place the mixed pure fuel rig depend declined by 34% throughout 2023 (43 rigs) and by 24% throughout 2024 (21 rigs). The decline in drilling rigs coincides with record-low pure fuel costs for many of 2024 and the broader adoption of superior drilling and completion applied sciences.
Within the Haynesville area, which spans Texas and Louisiana, drilling prices are usually increased than in different performs as a result of Haynesville wells are drilled to higher depths, normally between 10,500 toes and 13,500 toes deep. As pure fuel costs have usually declined over the past two years, rigs within the Haynesville have decreased 55% since December 2022 (39 rigs) as drilling has grow to be much less economical. Consequently, marketed pure fuel manufacturing within the Haynesville area has declined 7% over the identical interval.
Equally within the Appalachia area, which incorporates pure fuel produced from the Marcellus and Utica performs, rigs have declined 37% since December 2022 (19 rigs) with the drop in pure fuel costs. In consequence, development in marketed pure fuel manufacturing has been restricted to 4% over the identical interval.
The extent to which producers reply to cost adjustments is dependent upon a number of elements, resembling uncertainty round future costs, contracts, volatility available in the market, and worth hedging; present prices of supplies, tools, and labor; and availability of transportation and storage.
After the U.S. benchmark Henry Hub pure fuel worth reached a 14-year excessive of $6.95 per million British thermal models (MMBtu) in 2022, it fell 62% in 2023 ($4.31/MMBtu) and an additional 16% in 2024 ($0.43/MMBtu). The Henry Hub worth in 2024 was the lowest ever reported after adjusting for inflation, with March 2024 marking the bottom common worth of $1.51/MMBtu.
Producers in pure gas-rich areas have responded to those persistently low costs by drilling much less—as mirrored within the declining rig counts—and even by curbing manufacturing, which has grown inventories of drilled however uncompleted wells. If pure fuel demand and costs proceed to rise, producers may very well be in a greater financial place to finish these wells, doubtlessly permitting them to shortly enhance manufacturing.
Initially revealed on As we speak in Vitality. Principal contributors: Kenya Schott, Trinity Manning-Pickett
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