Chesapeake Energy will be cutting their natural gas drilling from 50 rigs to 12.
However, because of all the holes they've put down over the last 18 months CHK's gas production will actually be up for 2012, approx. 6% YoY.
The rig count will have to get into the high 400's before the market believes that production is coming down in any meaningful way.
(it was down 0.6% in Feb.)
U.S. energy producers this week trimmed the number of rigs drilling for natural gas to another 10-year low, as low prices kept squeezing profits and forced some to curb dry gas drilling operations.
The gas-directed rig count notched the fourth drop in the last five weeks, sliding by seven this week to 606, the lowest since early April 2002 when there were 591 rigs operating, data from Houston-based oil services firm Baker Hughes showed on Friday.
If in coming weeks the count drops to 590 or lower, gas-directed drilling would be at its lowest in 12-1/2 years, or since October 1999.
One of the mildest winters on record sharply cut gas demand and left a huge surplus in inventory that has pressured gas prices this year.
Front-month gas futures hit a 10-year low of $1.90 per mmBtu two weeks ago, a level that makes most dry gas drilling uneconomic.
While cheap gas has helped homeowners and businesses and attracted more demand from utilities and industry, it has been bad news for some dry gas producers that have been forced to sell gas at below cost.
The nearly steady drop in dry gas drilling over the last seven months -- the gas rig count is down 35 percent since peaking at 936 in October -- has raised expectations that producers were finally getting serious about stemming the flood of record gas supplies.
But rising output from shale has kept production growing.
Horizontal rigs, the type most often used to extract oil or gas from shale, rose for the second time in three weeks, gaining 19 to 1,158. The horizontal count is hovering just below the all-time high of 1,185 hit in late January....MORE