BHI: US rig count posts smallest decline in 22 weeks

During a week in which much of the oil and gas industry was either preoccupied with the Offshore Technology Conference in Houston or company earnings reports, the US drilling rig count snuck down just 11 more units to settle at 894 rigs working, according to data from Baker Hughes Inc.

The decline during the week ended May 8 represents the smallest during the 22 consecutive weeks in which the count has plunged. Over that period since Dec. 5, 1,026 units have gone offline (OGJ Online, Dec. 5, 2014).

The total of 894 is the lowest since June 12, 2009—a week that marked the nadir of the 2008-09 downturn at 876 units—and 961 fewer units compared with this week a year ago.  

The average US rig count for April was 976, down 134 from March and 859 from April 2014.

Raymond James & Associates Inc., meanwhile, maintains that the count’s downward momentum is nearing its end. According to an RJA daily energy update this week, weekly permit activity, a leading indicator of rig count activity, ramped up last week following a new low in the 4-week average since the peak.

The 964 permits issued last week brought the most recent 4-week average to 918, a new high since the bottom during the first week of March. “This seems to indicate that a bottom in the rig count may not be far off,” RJA concluded.

US, global declines roundup

During the week, oil rigs comprised all 11 of the units going offline, bringing its total to 668, down 860 year-over-year and 941 since a recent peak on Oct. 10. A 1-unit decline in gas rigs to 221 was offset by a 1-unit gain in rigs considered unclassified to 5.

Land rigs dropped 10 units to 858, down 924 year-over-year. Rigs engaged in horizontal drilling dropped 7 units to 692. Since Nov. 21, 680 horizontal units have gone offline. Rigs drilling directionally dropped 5 units to 88.

Rigs drilling in inland waters edged down a unit to 2. Offshore rigs were again unchanged at 34, but more declines internationally may be on the horizon.

Cowen & Co. said in a report this week that plans by Diamond Offshore Drilling Inc. to decommission 3 semisubmersible drilling rigs brings to 36 the number of floating units steered toward retirement amid the crude prices collapse (OGJ Online, May 8, 2015).

“Given our outlook for floater demand and visible supply additions through oncoming newbuild deliveries, we estimate that about 100 units should be removed from supply in order to balance the market,” the report said.

During April, there was an average of 335 offshore rigs drilling globally, representing a year-over-year decline of 48.

Canada’s overall rig count, meanwhile, fell 4 units this week to 75, down 70 year-over-year and 357 since a recent peak on Jan. 23. Gas rigs fell 3 units to 59 while oil rigs edged down a unit to 16. The average Canadian rig count for April was 90, down 106 from March and 114 from April 2014.

The worldwide count for April was 2,268, down 289 from March and 1,120 from April 2014.

Latin America’s 325 total is down 26 units since March and 78 since April 2014. Europe, at 119, lost 16 units since March and 32 since April 2014. Asia-Pacific, at 228, lost 5 units since March and 24 since April 2014. Africa, at 120, lost 5 units since March and 16 since April 2014.

The Middle East, meanwhile, gained 3 units since both March and April 2014 to 410.

Oklahoma leads overall modest losses

Oklahoma supplanted Texas this week as the losses leader among the major oil- and gas-producing states. Down 6 units to 102, the state has now lost 90 year-over-year and 112 since a recent peak of 214 on Nov. 26. That total also represents the state’s lowest since Jan. 15, 2010.

Reflecting Oklahoma’s decline, the Cana Woodford dropped 3 units to 35 and the Mississippian dropped 2 units to 23. In neighboring Texas, the Eagle Ford represented the only other major US basin to report multiple losses, leading all with a 5-unit decline to 105, down 113 year-over-year and 113 since a recent peak on Oct. 31.

Activity in Texas was otherwise quiet. The Permian merely edged down a unit to 237, representing the smallest decline of the basin’s 22-week slide.

Louisiana dropped 3 units to 70. New Mexico dropped 2 units to 44. Ohio, West Virginia, California, Kansas, Arkansas, Utah each edged down a unit to respective totals of 24, 20, 13, 10, 7, and 6.

Unchanged from a week ago were Pennsylvania, Wyoming, and Alaska at 47, 24, and 10, respectively.

North Dakota edged up a unit to 80. Colorado led the states with a 2-unit gain to 39. The DJ-Niobrara edged up a unit to 30.

More companies laying down rigs

Another flood of earnings reports from E&P companies hit the newswire this week, with a vast majority disclosing plans to reduce rigs from major US shale plays.

Apache Corp. said it averaged 15 rigs during the first quarter, down from 42 in fourth-quarter 2014 (OGJ Online, May 7, 2015). The company, currently running 11 rigs, said it continues to reduce its rig count.

No rigs are currently running in the Eagle Ford as the region focuses on completing wells in backlog, the company said (OGJ Online, Apr. 13, 2015). Apache reports 38 drilled-but-uncompleted Eagle Ford wells in backlog.

Apache averaged 4 units in the Montney in Canada during the quarter, but the count has since been reduced to zero as the region moves into breakup season. It said activity will be focused on completing a 7-well Duvernay pad in the summer, along with two Montney wells currently in backlog.

Devon Energy Corp. at quarter-end reported 30 rigs, half of which resided in the Permian. Noble Energy Corp. exited the first quarter with 4 drilling rigs operated in the DJ basin, and will further reduce drilling activity in the Marcellus in the second half to 1 operated rig and an average of 2-3 nonoperated rigs, down from 2 operated and 4 nonoperated rigs at the end of the first quarter.

Marathon Oil Corp. by the end of the first half will reduce its activity in the Eagle Ford to 7 rigs and Marcellus to 1 rig, and maintain activity in the Oklahoma resource basins at 2 operated rigs. Murphy Oil Corp. reduced its rig count in the Eagle Ford to 4 rigs during the first quarter and expects to maintain that level for the rest of the year.

Continental Resources Inc. in the Bakken during the quarter operated an average of 13 rigs, down from 19 rigs at yearend 2014. The company plans to average 10 operated rigs through the remainder of 2015, based on current market conditions.

In the SCOOP, Continental during the quarter operated an average of 20 rigs, targeting the Woodford and Springer formations, and plans to maintain 12 operated rigs through yearend based on current market conditions. The company plans to continue drilling with 4 rigs in the Northwest Cana Woodford through yearend.

Pioneer Natural Resources Co. is currently running 16 horizontal rigs, with 10 in the Spraberry-Wolfcamp and 6 in the Eagle Ford, both down from last year. In a departure of strategy from its competitors, PNR plans to add 2 horizontal rigs/month in the northern Spraberry-Wolfcamp beginning in July, contingent on the oil price outlook and a finalized agreement to sell its Eagle Ford midstream business, the company said.

Notable companies that reported plans last week to cut rigs in the coming months were Hess Corp., ExxonMobil Corp. subsidiary XTO Energy Inc., Whiting Petroleum Corp., and ConocoPhillips (OGJ Online, May 1, 2015).

Contact Matt Zborowski at matthewz@ogjonline.com.

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