After 22 straight weeks of double-digit and near triple-digit declines, the count over the past 5 weeks has dropped by an average of just 7 rigs/week. It has now fallen in 27 consecutive weeks overall, during which time it has lost 1,061 units (OGJ Online, Dec. 5, 2014). Compared with this week a year ago, the count is down 995 units.
An energy update earlier this week from Raymond James & Associates indicated that the number of weekly well permits issued in the US last week, using a 4-week average, was flat compared with the prior week. A primary indicator of rig count activity, 865 permits were issued last week, up from 839 during the previous week. However, the 4-week average only edged up by a permit to 859.
“New permits issued have remained relatively stable over the last 3 months, which makes us confident that this indicator has bottomed some time ago,” RJA explained. “However, the lack of a material upswing seems indicative of what we believe should be a slow recovery in rig activity.”
Resulting oil output declines
Paul Horsnell, head of Standard Chartered commodities research, noted this week that a drop in unconventional drilling is gradually starting to show in US production and inventory statistics (OGJ Online, June 10, 2015). He expects total US shale oil production will total 5.15 million b/d in December, a 191,000-b/d decline compared with output during December 2014.
In its monthly Drilling Productivity Report, the US Energy Information Administration forecasts crude production from seven major US shale plays to fall 91,000 b/d in July to 5.49 million b/d, including a 49,000-b/d drop in the Eagle Ford to 1.59 million and 29,000-b/d drop in the Bakken to 1.24 million b/d. All declines are up slightly from June (OGJ Online, June 9, 2015).
New-well oil production/rig across the plays is expected to increase in July by a rig-weighted average of 15 b/d to 419 b/d, with a 23-b/d rise in the Bakken to 654 b/d, 22-b/d rise in the Eagle Ford to 741 b/d, and 19-b/d rise in the Permian to 315 b/d.
EIA’s Short-Term Energy Outlook, meanwhile, forecasts overall US crude production will average 9.4 million b/d this year, up from 8.7 million b/d last year, and then drop to 9.3 million b/d in 2016 (OGJ Online, June 9, 2015).
“Production has increased as producers work through the backlog of uncompleted wells—completing more wells than they are drilling—and achieve potentially better completions with higher initial production rates,” EIA said.
EIA expects overall production will begin to drop in June, with continuing declines through early 2016.
Oil-targeting, land rigs down again
During the week, oil-directed rigs decreased 7 units to 635, down 974 from a recent peak on Oct. 10, 2014, and 907 year-over-year. Gas-directed rigs edged down a unit to 221. Rigs considered unclassified also edged down a unit, settling at 3.
Land rigs lost 12 units to 825, down 955 year-over-year. A week after their smallest decline of the year, rigs engaged in horizontal drilling dropped 10 units to 663, down 709 from a recent peak on Nov. 21, 2014, and 585 year-over-year. Rigs drilling directionally edged down a unit to 95.
Offshore rigs gained 2 units to 29, down 26 since the beginning of the year and 30 year-over-year. Rigs drilling in inland waters edged up a unit to 5.
Canada’s rig count continued its upward trajectory, gaining 11 units to 127, down 117 year-over-year. Oil-directed rigs jumped 9 units to 68 while gas-directed rigs gained 2 units to 59.
Canada’s National Energy Board this week noted that the percentage share of rigs in western Canada targeting natural gas has been on the rise since 2012 (OGJ Online, June 10, 2015). By late 2014, the majority of rigs were drilling for gas instead of oil, and in January and February of this year, the share had increased to 62%.
The Canadian Association of Petroleum Producers estimates production of Canadian oil will increase 43% over 16 years to 5.3 million b/d by 2030 compared with 3.7 million b/d in 2014 (OGJ Online, June 11, 2015).
The oil sands will remain the primary driver of growth, with production reaching 4 million b/d by 2030. Conventional oil production in western Canada, including condensate, is projected at 1.3 million b/d, while eastern Canadian offshore production is forecast at 91,000 b/d.
Light activity in major states, basins
All of the major oil- and gas-producing states reported rig counts that were either up a unit, unchanged from last week, or down a unit. Down a unit each was Texas at 363, New Mexico at 45, Colorado at 38, Ohio at 21, West Virginia at 19, Kansas at 13, Alaska at 9, and Utah at 6.
Unchanged from a week ago were Pennsylvania at 46, Wyoming at 22, California at 11, and Arkansas at 5. Oklahoma at 107 and Louisiana at 71 each edged up a unit.
Contact Matt Zborowski at firstname.lastname@example.org.