U.S. gas producers may be able to keep domestic production flat at current drilling levels. However, location does matter. That’s the conclusion of a rig-efficiency study conducted by analysts Manuj Nikhanj and Salim Jamal at Calgary-based Ross Smith Energy Group Ltd.

Rig efficiency is a vital element in forecasts of natural gas supply, because rig counts are the best forward-looking metric for inferring future production. To investigate rig efficiency, the Ross Smith study analyzed data from more than 100,000 gas wells drilled between January 2004 and September 2009 in the five U.S. states responsible for more than 80% of production additions.

The study uncovered some interesting trends. Louisiana’s Haynesville and Arkansas’ Fayetteville shale plays were found to be particularly efficient in terms of the volume of gas produced per rig day, posting results twice as great as seen in the Barnett shale.

“The 200 rigs currently operating in those two plays are equivalent to almost 400 rigs in the Barnett,” said Nikhanj, vice president and the lead analyst for the study.

From 2004 to 2009, the average time from spud to rig release was between 20 and 23 days per well. Drilling times have remained relatively constant, even though horizontal wells in shale plays comprise a greater percentage of drilled wells, and the average distance drilled per rig per day has increased.

Not surprisingly, the study found that early in a shale play’s life, spud-to-rig-release times drop more quickly when compared with mature plays. The Marcellus and Haynesville are showing rapid signs of improvement, from 36 and 58 days in mid-2008 to a current pace of 22 and 45 days, respectively.

During the same period, improvements in Barnett and Fayetteville drilling times slowed.

Well results are also improving significantly. Average deliverability for both horizontal and directional wells soared by 73% and 44%, respectively, from June 2008 to September 2009. The remarkable increase is driven by the reallocation of rigs to high-deliverability shale plays and operators’ preference to target better prospects with today’s smaller budgets. The average horizontal rig now brings on twice as much gas per drill day as a vertical.

Another aspect of efficiency relates to the time it takes for a well to be placed on production. The Ross Smith analysts found that while drilling a well requires 22 days on average, in some cases it takes 12 months before 90% of the gas comes on production. That’s likely due both to a slowdown in completion work and a greater proportion of horizontal wells in the mix, as horizontals generally require more complicated completions than verticals.

The popularity of pad drilling is another factor. Pad drilling holds many advantages, not the least of which is reduced costs associated with rig moves. On the other hand, the pad strategy lengthens time to production. From a single pad, an operator can drill up to 15 wells spaced 100 to 200 feet apart, so drilling 10 wells from a single pad at an average of 20 days per well requires about seven months.

“The long period from spud to sales results in a disconnect between the current rig count and when that rig actually translates into production,” Nikhanj said. “On average, rigs running five months ago bring on the production additions we see today.”

Furthermore, the analysts calculated that a backlog of some 1,100 Barnett and Fayetteville wells awaits completion and pipeline hookup. That’s the normal backlog created by pad drilling in these plays. Additionally, although operators were tied into long-term drilling contracts, they have deferred many completions to conserve capital.

Finally, the shift to drilling horizontal wells in tight formations has required more completion dollars per well, which has upped the capital intensity of the rig fleet. The capital cost associated with 900 gas rigs today may be equivalent to 1,200 rigs two years ago.

The upshot? Today’s rig fleet is lean and mean, particularly when it comes to shale drilling. “With more than 40% of the 900 gas rigs currently running in the shales, producers may be able to keep U.S. production flat, in our opinion,” says Nikhanj.