BHI: US oil rig count continues rise, but overall count unchanged

The overall US drilling rig count sat unchanged during the week ended Aug. 14, remaining at 884 rigs working, according to data from Baker Hughes Inc. Oil-directed rigs, however, continued their warm streak—albeit modestly—with a 2-unit gain.

The overall count is now down 1,029 units year-over-year.

In an energy update released earlier this week, Raymond James & Associates noted that 832 well permits were issued last week, representing a decline from the 857 issued during the previous week. Utilizing a 4-week average, weekly permits issued were lower by 15 permits week-over-week.

“This is not surprising, given the current oil price environment,” RJA said. “With WTI below $45[/bbl] right now, operators are likely taking a step back to see what happens. If prices continue to fall—or even stay flat as we are modeling—from where they are currently, we do not expect to see any meaningful pickup in activity.”

US onshore oil output takes hit

The latest Drilling Productivity Report (DPR) from the US Energy Information Administration indicates that September crude oil production from seven major US shale plays is expected to fall 93,000 b/d to 5.27 million b/d (OGJ Online, Aug. 10, 2015).

The Eagle Ford continues to represent a bulk of those declines, expected to fall 56,000 b/d in September to 1.48 million b/d. The Bakken is forecast to fall 27,000 b/d to 1.16 million b/d, while the Niobrara is expected to fall 18,000 b/d to 399,000 b/d. In the Permian, meanwhile, EIA projects a larger increase for September than it projected for August, forecasting a September rise of 8,000 b/d to 2.04 million b/d.

New-well oil production/rig across the seven plays is projected to increase in September by a rig-weighted average of only 1 b/d to 434 b/d. The Eagle Ford also led the way at 26 b/d to 792 b/d, followed by the Niobrara at 15 b/d to 561 b/d.

Meanwhile, in its Short-Term Energy Outlook (STEO) for August, EIA reports that total US crude production declined 100,000 b/d in July compared with June, and is expected to continue decreasing through mid-2016 before growth resumes late in 2016 (OGJ Online, Aug. 11, 2015).

Overall production is projected to increase from an average of 8.7 million b/d in 2014 to 9.4 million b/d in 2015 and then decrease to 9.0 million b/d in 2016. Compared with July's STEO, the forecast is 100,000 b/d lower for 2015 and 400,000 b/d lower for 2016.

More rig count declines expected

The decrease reflects a lower oil price outlook that will reduce expected oil-directed rig counts and drilling and well-completion activities throughout the forecast period. Last week, several US exploration and production firms reported plans to lay down rigs during this year’s second half (OGJ Online, Aug. 7, 2015).

“Oil prices, particularly in the second quarter of 2015, remained high enough to support continued development drilling in the core areas of the Bakken, Eagle Ford, Niobrara, and Permian basins, with July showing the first month-to-month increase in the oil-directed rig count since October 2014,” EIA explained. “However, the recent fall in crude oil prices and lowered outlook for oil prices over the forecast period are expected to prolong and deepen onshore production declines.”

Offshore production from the Gulf of Mexico in fourth-quarter 2016, meanwhile, is expected to average 1.6 million b/d, up from 1.4 million b/d in the same period in 2014.

Light week of US activity

During the week, oil-directed rigs reached a total of 672, down 917 year-over-year. However, since the week ended June 26, the group has risen 44 units. Gas-directed rigs relinquished 2 units to 211. Rigs considered unclassified were unchanged at 1.

Reflecting the warm streak for oil-directed rigs, land rigs have steadily creeped upward over the past several weeks. This week, they gained 3 units to 843. Rigs engaged in horizontal drilling gained 4 units to 676, while directional drilling rigs lost 2 units to 81.

Rigs drilling offshore, where output is expected to rise in the coming year as new projects come online, declined 3 units to 35. Rigs drilling in inland waters were unchanged at 6.

Canada’s rig count increased 3 units to 211. All of those units were gas-directed rigs, which now total 111. Oil-directed rigs were unchanged at 100. Canada now has 190 fewer units working compared with this week a year ago.

Texas, Eagle Ford lead rises

A week after posting its largest rise since Oct. 24, 2014, Texas again led the major oil- and gas-producing states in gains, adding 6 units to reach a total of 389. The Eagle Ford rose 3 units to 101, while the Barnett rose 2 units to 10.

Alaska jumped 3 units to 12. Colorado, Wyoming, and Kansas each gained 2 units to 38, 24, and 12, respectively. Unchanged from a week ago were California at 12, Arkansas at 4, and Utah also with 4.

More states reported losses than gains. Pennsylvania, Ohio, and West Virginia each edged down a unit to respective totals of 38, 19, and 18. For Pennsylvania, its total is the state’s lowest since June 12, 2009, and reflects a 2-unit loss in the Marcellus to 53. New Mexico and North Dakota each lost 2 units to 69 and 52, respectively. The Williston relinquished 2 units to 70.  

Oklahoma and Louisiana each dropped 4 units to respective totals of 103 and 78.

Contact Matt Zborowski at matthewz@ogjonline.com.

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