If rig permits are a leading indicator of domestic land-drilling activity, as they historically have been, then look for an uptick in the U.S. rig count in second-half 2007. A recent report by Raymond James & Associates indicates that, after declining 40% from October 2006 through mid-January 2007, the subsequent domestic land-rig permit count through late April has rebounded 70%. What caused this? For one thing, the persistence of colder weather-off and on even in April-has kept the 12-month gas-futures strip north of $8 for quite some time now. "Our belief continues to be that, at strip pricing above [that level], every land rig that can work, will be working," says J. Marshall Adkins, Houston-based director of equity research for the investment-banking firm. "Thus, as operators begin to adjust their thinking to this higher pricing curve versus a quarter ago, we suspect that drilling activity levels will start to ramp back up during the second half of this year." For more on this, see the June issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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