BHI: US rig count declines 10 units, falls below nadir of 2008-09 downturn

The US drilling rig count dropped 10 units during the week ended May 29 to settle at 875 rigs working, falling below the nadir of the 2008-09 downturn by a single unit, according to data from Baker Hughes Inc.

The rig count has now declined in 25 consecutive weeks, during which time it has plunged 1,045 units (OGJ Online, Dec. 5, 2014). Compared with this week a year ago, the count is down 991 units.

Although an uptick from the mere 3 units lost last week, the loss of 10 units represents the second-smallest decline of the 25-week period.

Raymond James & Associates Inc.’s energy research team noted this week that most oil field services companies with which it speaks are saying “the bottom is in” for US drilling following last week’s rise in the US onshore count for the first time since last November. The analyst noted, however, that “it’s difficult to envision a ‘V-shaped’ recovery motivated by sub-[$60/bbl] crude—even if it is $15 higher than the bottom.”

RJA maintains its prediction of a mid-June trough and believes there will be a “painstakingly slow recovery until mid- to late-fall, at which point the recovery pace picks up modestly.”

If things unfold as it expects, RJA doesn’t see production growth ramping up until later on even though “there has undeniably been an element of high-grading within the oil-directed rig count.” It explained that the loss of rigs has far outpaced the rise in efficiency.

Meanwhile, Goldman Sachs analysts—who believe producers might be leaning toward a resumption of drilling—see US production falling slightly through the third quarter before picking up in 2016 (OGJ Online, May 27, 2015).

Oil, land rigs down again

Oil-directed rigs lost 13 units to 646, down 969 from a recent peak on Oct. 10, 2014, and 890 year-over-year. Gas rigs gained 3 units to 54.

Land-based rigs dropped 9 units to 844, down 948 year-over-year. They were up 3 last week after 25 straight weeks of losses. Following a mere 2-unit loss last week, rigs engaged in horizontal drilling fell 9 units to 674, down 698 from a recent peak on Nov. 21, 2014, and 577 year-over-year. Rigs drilling directionally gained 5 units to 90.

Rigs drilling in inland waters edged down a unit to 2. Offshore rigs were unchanged at 29.

Canada’s rig count, meanwhile, recorded its largest gain since January, jumping 26 units to 98, still down 342 from a recent peak on Jan. 16 and 100 year-over-year. The sudden jolt came from a 20-unit rise in oil-directed rigs to 44. Gas-directed rigs rose 6 units to 54.

Major states, basins

A mostly uneventful week compared with previous weeks during this downturn saw just five states report multiple-rig losses.

After no movement in Texas last week, the first week in which the state hadn’t lost a unit in 25 weeks, the count declined 4 units to 369, down 537 from a recent peak on Nov. 21 and 525 year-over-year. The Eagle Ford, however, led all major basins with a 3-unit rise to 110. That marks its second rise in three weeks.

In the wake of the Santa Barbara oil spill, California fell 3 units to 10—its lowest total dating back to when BHI started collecting states’ data in January 2000. Of the 3 that went offline, 1 was an offshore rigs, the state’s last online.

Louisiana, Pennsylvania, and Arkansas each fell 2 units to 67, 47, and 6, respectively. The Marcellus fell 3 units to 63. North Dakota edged down a unit to 77.

Unchanged from a week ago were Ohio at 23, Wyoming at 22, West Virginia at 18, Kansas at 13, and Utah at 7.

New Mexico and Alaska each edged up 1 unit to 48 and 10, respectively. Oklahoma and Colorado each gained 2 units to 106 and 41, respectively.

Contact Matt Zborowski at matthewz@ogjonline.com.

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