BHI: US rig count continues upward creep

Although the overall US drilling rig count merely edged up a unit to 863 rigs working during the week ended July 10, it represented the third consecutive week of gains and another jump in oil-directed rigs, according to data from Baker Hughes Inc.

Over the past 3 weeks the overall count has risen 6 units. The warm streak follows 28 consecutive weeks of losses, which has resulted in the count currently having 1,012 fewer units year-over-year (OGJ Online, June 26, 2015).

BHI also reported this week that the average US rig count for June was 861, down 28 from May and down 1,000 from June 2014.

In an energy update this week, Raymond James & Associates Inc. noted that permitting activity, a main indicator of rig count activity, was low a week ago as a result of the Independence Day holiday in the US.

Just 680 new well permits were issued—the same amount as the prior week and again the fewest permits issued in a single week since the Christmas-New Year’s holiday. A multi-month high of 1,030 permits was issued just 2 weeks ago. Utilizing a 4-week average, weekly permits issued were lower by 46 permits week-over-week.

“As we mentioned last week, it is hard to come to much of a conclusion based on a last week’s data by itself, and this week’s data point is meaningless (given the typical softness in permit numbers around the holidays),” RJA explained. “The next week is likely to give us a better feel for where permits are trending.”

Overall US oil output falls

Total US crude oil production dropped 50,000 b/d in May compared with April, when onshore production began declining, according to data provided by the US Energy Information Administration in its July Short-Term Energy Outlook (OGJ Online, July 7, 2015).

Declines are expected to continue over the next several months. “The forecast decline in US monthly oil production through early 2016 is the result of low oil prices, which pushed oil companies to reduce their investment in drilling that resulted in the lowest number of rigs drilling for oil in nearly five years,” EIA explained.

“While US crude oil production is expected to decline over the months ahead, total output in 2015 is on track to be the highest in 45 years,” it said. US crude production during this year’s first half averaged 9.6 million b/d, up 300,000 b/d from average production during fourth-quarter 2014 despite a 60% decline in the total US oil-directed rig count since October 2014.

“US natural gas marketed production growth is forecast to slow in 2016, but output is still expected to flow past 80 [bcfd] for the first time,” EIA said, attributing the increase primarily to more efficient drilling techniques and strong demand in the industrial and electric power sectors.

EIA releases its next drilling productivity report (DPR) for major US shale plays on July 13.

Oil-directed rigs up again

During the week, rigs targeting oil gained 5 units to 645, now up 17 units from 2 weeks ago after 29 straight weeks of losses. The count hasn’t risen in successive weeks since September 2014. Meanwhile, gas-directed rigs were down for a second week in a row, dropping 2 units to 217. Rigs considered unclassified lost 2 units to reach 1 rig working.

Land rigs, up 4 last week, edged down a unit this week to 827. Rigs engaged in horizontal drilling, up last week for the first time in 32 weeks, fell 3 units to 654. Directional drilling rigs lost 9 units to 88.

Offshore rigs gained 2 units to 31. Rigs drilling in inland waters were unchanged at 5.

Canada’s rig count also continued its upward momentum, jumping 30 units to 169. Its count has now risen in 7 of the last 9 weeks, gaining 94 units over that time. This week’s gain was spurred by a rebound in oil-directed rigs from last week’s losses. Up 19 units to 91, oil-directed rigs have risen 75 units since a recent nadir on May 8. Gas-directed rigs, meanwhile, gained 11 units to 78. Canada’s overall count is still down 146 year-over-year.

The average Canadian rig count for June was 129, up 49 from May and down 111 from June 2014. Around the world, the total June count was 2,136, up 9 from May and down 1,309 from June 2014.

Light rebound in Texas

Rising 5 units to 368, Texas led the major oil- and gas-producing states in its second consecutive week of gains after 32 straight weeks of losses. It’s the first time the state was posted a rise in successive weeks since October 2014. Texas still has 530 fewer rigs working year-over-year.

The Permian led the major basins with a 7-unit jump to 239, all of which are targeting oil. It’s the basin’s biggest rise since October 2014. The Eagle Ford, however, fell 4 units to 102.

The light rebound for Texas comes on the heels of a dramatic reduction in drilling activity during the first half of the year. Data from the Texas Railroad Commission indicates that just 5,564 original drilling permits, of which 1,366 were for oil, were issued in the state between January and June of this year, compared with 11,860, of which 3,424 were for oil, over the same period last year. Consequently state oil production for April was 69.6 million bbl, down 10.9 million bbl from March and 6.3 million bbl year-over-year.

New Mexico, meanwhile, increased 4 units to 49. Colorado, Ohio, and California each edged up a unit to 38, 19, and 12, respectively. Unchanged from a week ago were Oklahoma at 106, Wyoming at 21, Alaska at 10, and Arkansas at 4.

Louisiana, West Virginia, and Utah each edged down a unit to 72, 18, and 7, respectively. Pennsylvania and Kansas each dropped 2 units to respective totals of 45 and 10. North Dakota, up 2 units last week, dropped 6 units this week to 70, its lowest total since Jan. 8, 2010. The Williston, also up 2 last week, dropped 6 units to 71.

Contact Matt Zborowski at matthewz@ogjonline.com.

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