Chesapeake Energy Corporation (CHK), Kodiak Oil & Gas Corp (USA) (KOG), Whiting Petroleum Corp (WLL): Do Rig Counts Even Matter Anymore?

Longer time to market
Another reason the rig count data may skew the true scope of oil and gas activity has to do with the longer amount of time it takes to get output to market, or what analysts at ISI Group have termed a longer “spud-to-sales” time.

In Pennsylvania, for instance, several hundred wells have been drilled but not completed because the takeaway capacity to get their production to market simply isn’t there. Several operators have been forced to drastically reduce their rig counts in the region. For instance, both EXCO Resources Inc (NYSE:XCO) and Talisman Energy Inc. (USA) (NYSE:TLM) have just one rig each remaining in the Marcellus.

Final thoughts
Though the rig count is obviously still a very important metric, it may not be nearly as good a gauge of supply as it was in the past. As exploration and production companies see drilling costs and drilling days decline, many are opting to reduce rig counts, while still intending to bring new wells online and increase production.

For instance, Marathon Oil Corporation (NYSE:MRO), which reported sizable improvements in both well costs and drilling days in the Eagle Ford, said it may reduce its rig count in the region by two this year, even though it plans to add 290 wells and boost production to 85,000 barrels of oil equivalent per day.

The article Do Rig Counts Even Matter Anymore? originally appeared on Fool.com and is written by Arjun Sreekumar.

Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool has options on Chesapeake Energy.

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