How Are Natural Gas Prices And The Global Gas Rig Count Correlated?

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Natural gas prices and the global gas rig count are positively correlated, with a correlation of almost 95%. As natural gas prices fall, the price realizations for oil and gas producing companies also decline. As a result, these companies are forced to pull back their production, implying that they hold back their capital budget for exploration and production. This leads to a sharp drop in the demand for gas rigs worldwide, resulting in a fall in the global gas rig count. In the table below, we show how the plummeting natural gas prices over the last 20-21 months has caused a steep decline in the global gas rig count (US & International).

CHK-Q&A-gas1

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Chesapeake Energy

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