BHI: US rig count nears possible all-time low

The overall US drilling rig count is now 1 unit from matching what could be its lowest level in modern history.  

A 13-unit loss to 489 was posted during the week ended Mar. 4, the ninth-straight week of double-digit declines to begin 2016, according to Baker Hughes Inc. data.

The total is the new lowest since Apr. 23, 1999, when the 1998-99 downturn hit its bottom of 488, which itself is the lowest level in records dating back to 1948 and perhaps since the earliest days of the US oil and gas industry in the 19th century.

“While there is no consistent series for drilling activity before 1948, we think it likely that to find a lower level of activity would require going back to the 1860s, the early part of the Pennsylvania oil boom,” said Paul Hornsell, head of commodities research for Standard Chartered Bank, in a research note this week.

Further noticeable declines appear to be on the horizon in 2016, as exploration and production firms over the past few weeks have reported reduced drilling activity for the year. Common themes among those firms have been trimmed companywide rig counts, improved completions, and prized inventories of drilled but uncompleted (DUC) wells (OGJ Online, Feb. 26, 2016).  

Additionally, Anadarko Petroleum Corp. this week said that it’s reducing its US onshore rig count to 5 operated units from an average of 25 in 2015, while focusing on its base production and retaining the flexibility to leverage its inventory of 230 DUC wells.

In the Delaware basin, Anadarko plans to run 4 operated rigs, which will be directed toward delineation and lease maintenance rather than development activities. In the DJ basin, the company expects to operate 1 unit, down from 7 in 2015.

Oil output slowly declining

Improved drilling efficiencies by E&P firms have mitigated more pronounced US crude oil production declines, thereby lessening the impact of the plunging US rig count.

The current drilling downturn dates back to November-December 2014—a few months after crude oil prices began their plunge to what’s now a third of their value—and it wasn’t until second-quarter 2015 that total US crude output began to decline.

According to data released by US Energy Information Administration this week, US crude production in 2015 averaged 9.43 million b/d, up from the 8.71 million b/d averaged in 2014 (OGJ Online, Mar. 1, 2016). The US rig count ended 2015 with 698 units, compared with 1,840 at the end of 2014.

However, the increase in output shrunk to 722,000 b/d in 2015 from 1.25 million b/d in 2014. Production in December 2015 averaged 9.26 million b/d, down from 9.31 million b/d in November and 9.43 million b/d in December 2014.

Year-over-year declines are expected this year and next. In its Short-Term Energy Outlook, EIA forecasts US production to return to an average of 8.7 million b/d in 2016 and then fall again to 8.5 million b/d in 2017.

Financial services firms have projected the rig count to bottom out in the neighborhood of 400 units in the next couple of months before embarking on a steady rebound (OGJ Online, Feb. 12, 2016). The improved efficiencies are expected to prevent the count from again nearing 2014 levels.

Oil rigs fall in 11th-straight week

During the week, US oil-directed rigs continued a slide that began last year, shedding 8 more units to a total of 392, down 1,217 since their peak in BHI data on Oct. 10, 2014, and at their lowest point since Dec. 4, 2009.

Since its last increase on Dec. 18, 2015, the oil-directed count has plunged 149 units.  

Gas-directed rigs dropped 5 units to 97, down more than 100 since last fall and their new lowest point in BHI data that dates back to July 1987.

Onshore rigs relinquished 10 units to 463, down 670 year-over-year. Rigs engaged in horizontal drilling lost 8 units to 389, down 983 since a peak in BHI data on Nov. 21, 2014, and their lowest point since June 12, 2009. Directional drilling rigs dropped 5 units to 42.

Two rigs halted operations in Louisiana waters and 1 in Texas waters, bringing the overall US offshore count to 24. Rigs drilling in inland waters were static at 2.

While Lower 48 production has fallen gradually since April 2015, the federal offshore Gulf of Mexico has done its part to support overall US production levels thanks to several long-term projects coming on stream.

In December, output from the US gulf rose to 1.63 million b/d, up from 1.52 million b/d in November and 1.45 million b/d in December 2014, EIA reported. During 2015, the gulf averaged production of 1.54 million b/d, up from 1.4 million b/d in 2014.

Canada’s rig-count dive again trumped that of the US during the week, plunging 46 units to 129, representing its biggest drop of the year. After beginning the year with large gains, the count has been nearly cut in half since a recent peak of 250 on Jan. 22.

Oil-directed rigs again anchored Canada’s dive, with 33 units going offline during the week to settle at a total of 50, down 100 year-over-year. However, the count is still higher than the 12 with which it ended 2015. Gas-directed rigs gave up 13 units to 79.

More pain for Texas, Oklahoma, North Dakota

Among the major oil- and gas-producing states, Texas held a slight edge in declines during the week, losing 4 units to 227, down 731 since a peak in BHI data on Aug. 29, 2008, and the state’s lowest count since the 1990s.

The Permian decreased 6 units to 158, down 410 since a recent peak on Dec. 5, 2014. The Eagle Ford lost another unit to settle at 46, down 213 since a peak on May 25, 2012. The Granite Wash, meanwhile, edged up a unit to 10.

EIA reported that Texas crude production fell to 3.34 million b/d in December from 3.41 million b/d in November and 3.51 million b/d in December 2014. During the year, Texas averaged 3.46 million b/d, compared with 3.17 million b/d in 2014.

The Texas Alliance of Energy Producers (TAEP) indicated, meanwhile, that crude output in Texas during January fell 2.3% year-over-year (OGJ Online, Mar. 3, 2016).

Oklahoma and North Dakota each lost 3 units to 70 and 33, respectively. The Williston also decreased 3 units to 33. The Mississippian edged down a unit to 7, while the Cana Woodford edged up a unit to 37.

Oklahoma’s count, down 139 units compared with when it entered 2015, is at its lowest point since Sept. 18, 2009. North Dakota’s count, down 170 units since an all-time high during June 1-8, 2012, is at its lowest level since May 15, 2009.

North Dakota crude production dropped to 1.14 million b/d in December from 1.17 million b/d in November and 1.23 million b/d in December 2014, EIA said. For 2015, North Dakota averaged 1.17 million b/d, up from 1.09 million b/d in 2014.

Colorado fell 2 units to 17, its lowest level since Sept. 29, 2000. The DJ-Niobrara edged down a unit to 15, a decline of more than half year-over-year.

Louisiana, New Mexico, and West Virginia each edged down a unit to respective totals of 46, 17, and 12. The Marcellus edged down a unit, settling at 28, while the Haynesville edged up a unit to 15.  

Alaska was the only state to post an increase, edging up a unit to 12.

Contact Matt Zborowski at

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