BHI: US rig count falls for 20th consecutive week as E&Ps continue to trim activity

The US drilling rig count dropped 5 units to 415 rigs working during the week ended May 6, representing the 20th striaght week of declines, according to Baker Hughes Inc. data.

The count has now fallen in 35 of the past 37 weeks, and 1,505 units since the overall drilling dive commenced following the week ended Dec. 5, 2014 (OGJ Online, Dec. 5, 2014).

BHI also reported that the average US rig count for April was 437, down 41 from March and down 539 from April 2015.

Moody's Investors Service said this week that low crude oil and natural gas prices and suppressed exploration and production spending will prevent any chance of a recovery within the global oil field services industry until at least late 2017.

In its report, "Depressed Energy Prices Continue Major Shake-Up in OFS Industry," the rating agency maintains a negative global outlook. Even if oil prices rebound modestly in 2016, it said, recovery will lag given the industry's overcapacity and the gradual increase in drilling activity.

In North America, Moody’s believes oil prices must hold above $55/bbl and gas prices above $3/Mcf over an extended period to revive drilling interest. "We expect the US rig count to set a cyclical bottom in 2016 and then inch up in 2017 as oil markets narrow the supply-demand gap," said Moody's AVP-Analyst Sajjad Alam.

Last week, Martin Craighead, BHI chairman and chief executive officer, said that his firm believes the US rig count will begin to stabilize in the second half, but without a meaningful increase in activity during the year (OGJ Online, Apr. 29, 2016).

“Conversely, the international rig count is predicted to drop steadily through the end of the year as we see limited new projects in the pipeline,” he said in the firm’s first-quarter earnings report.

Losses outside US

Canada’s rig count edged down a unit this week to 36, down 214 units since Jan. 22 and the latest of decades-long lows. Oil-directed rigs edged up a unit to 11, but that was offset by a 2-unit loss in gas-directed rigs to 24, representing their new recent nadir.

Canada’s average April rig count was 41, a decline of 47 from March and down 49 year-over-year.

The worldwide rig count for April was 1,424, down 127 from March and down 844 year-over-year.

Latin America fell 15 units in April compared with March to average 203 rigs working, down 122 from April 2015. A 5-unit rise in Argentina to 73, still down 34 year-over-year, was more than offset by a 9-unit dive in Brazil to 19, down 24 year-over-year; and 4-unit decline in Mexico to 23, down 44 year-over-year.

The Middle East dropped 13 units to 384, down 26 from April 2015. The monthly loss largely reflects a 5-unit drop in Iraq to 43, down 10 year-over-year; and a 4-unit decline in Saudi Arabia to 123, down 3 year-over-year.

Europe lost 6 units in April to 90, down 29 year-over-year. Norway and Romania each recorded 2-unit losses to respective totals of 17 and 4. Norway’s count is down only 1 unit from its April 2015 average.  

Asia-Pacific declined 4 units to average 179, down 49 year-over-year. Australia posted a 2-unit loss to 6, down 12 year-over-year; and Indonesia also posted a 2-unit loss, settling at 17, down 15 year-over-year.  

Africa edged down a unit in April from March to average 90 rigs working, down 30 from April 2015. Nigeria shed 2 units to 6, down 3 units year-over-year.

US oil rigs down; Texas, Permian up  

The US oil-directed rig count fell for a seventh consecutive week this week, shedding 4 units to 328, down 1,281 since its peak in BHI data on Oct. 10, 2014, and its lowest level since Oct. 23, 2009. The current count remains well-above the 2008-09 downturn’s nadir of 179 touched on June 5, 2009.

US gas-directed rigs edged down a unit to 86, representing their new low point in BHI data. One rig considered unclassified remains active in the US.

Land-based units lost 3 to 388, down 470 year-over-year. Rigs engaged in horizontal drilling dropped 6 units to 318, down 1,054 since a peak in BHI data on Nov. 21, 2014, and their lowest count since Dec. 1, 2006. Directional drilling rigs were again down 2 units, settling at 44.

With 1 rig stopping work offshore Louisiana, the overall US offshore count is now 24, down 42 units from a recent high on Sept 12, 2014. One rig drilling in inland waters also went offline, brining that total to 3.

Among the major oil- and gas-producing states, Oklahoma led all with a 3-unit decline to 57, down 152 units compared with when it entered 2015, and the state’s lowest point in BHI data dating back to the 1990s. The Mississippian, however, gained 2 units to 6.

Including the 1 offshore rig, Louisiana decreased 2 units to 43. The state’s count of 21 onshore rigs and 22 offshore rigs equals its lowest level in BHI data dating back to the 1990s.

North Dakota, Colorado, Ohio, and Alaska each relinquished a unit to 25, 15, 10, and 6, respectively. North Dakota’s count is down 178 units since an all-time high during June 1-8, 2012, and at its lowest since Jan. 27, 2006. Colorado’s count is down 62 units since a recent peak on Sept. 26, 2014, and at its lowest level since Sept. 15, 2000.

Mirroring the movement in their home states, the Williston and Utica each lost a unit to 25 and 10, respectively. The DJ-Niobrara also decreased a unit to 13.

Two states posted gains this week. Utah increased a unit to 3, while Texas rose 3 units to 188, still down 770 units since a peak in BHI data on Aug. 29, 2008. The Permian recorded its first increase of the year, jumping 5 units to 139, still down 429 since a recent peak on Dec. 5, 2014. The Eagle Ford fell 3 units for the second straight week to 34, down 225 since a peak on May 25, 2012.

US E&P drilling activity update

A second wave of quarterly earnings reports by US E&P firms hit the newswires this week, and with those reports came more updates on first-quarter, present, and future drilling activity.

Capital reductions during the first quarter by Anadarko Petroleum Corp. have resulted in a 67% year-over-year reduction in the company’s operated US onshore rig fleet.

The firm operated 6 units, spud 23 wells, and turned on 26 operated wells in the Delaware basin; spud 3 wells utilizing 1 operated unit in the Eagle Ford; operated an average of 2 unit and drilled 26 wells in the DJ basin; and operated 1 unit and drilled 2 carried exploratory wells in Wyoming.

In the Gulf of Mexico, Anadarko spudded the Shenandoah-5 appraisal well spud during the quarter to confirm and extend reservoir boundaries. When drilling concludes, the rig will move to the Warrior prospect.

Apache Corp. averaged 10 units onshore North America and drilled and completed 47 gross-operated wells during the first quarter. In the Permian, the firm averaged 6 operated units and drilled and completed 32 gross-operated wells, down from 57 drilled and completed wells in fourth-quarter 2015.

Concho Resources Inc. during the first quarter averaged 10 rigs, down from 12 in fourth-quarter 2015. Concho started drilling or participating in a total of 40 gross wells, of which 31 are operated and completed 50 gross wells during the first quarter.

The firm currently has 8 horizontal units in the Delaware basin, with 4 in the northern portion of the basin and 4 in the southern portion. It drilled 27 gross wells in the Delaware, including 5 in the Avalon shale, 9 in the Bone Spring sands, and 13 in the Wolfcamp.

After closing on its acquisition of 12,000 net acres in its core North Harpoon prospect in the southern Delaware during the first quarter, Concho added 2 rigs to the acreage in April. The firm currently has 1 horizontal rig in the Midland basin, with plans to add 2 rigs during May 2016. It currently has 2 horizontal rigs on the New Mexico shelf.

SM Energy Co. ended the first quarter with 4 rigs working, including 1 in the Eagle Ford, 2 in the Bakken-Three Forks, and 2 in the Permian, with 1 added before quarter’s end. The firm started the year with 6 units, including 2 in the Eagle Ford, 2 in the Bakken-Three Forks, and 1 in each of the Permian and Powder River basins.

Carrizo Oil & Gas Inc. is operating 2 units in the Eagle Ford and currently expects to drill 57 gross, or 53 net, operated wells and complete 55 gross, or 52 net, operated wells in the play during 2016. Cimarex Energy Co. is operating 9 units on its acreage in the Permian and Midcontinent, with a reduction to 4 planned by the end of the second quarter. 

Devon Energy Corp. ended the first quarter with 6 rigs working, with 4 in the STACK and 2 in the Eagle Ford. That’s down from 10 overall in fourth-quarter 2015 when the firm operated 5 in each of the stack and Delaware basin, but none in the Eagle Ford.

Continental Resources Inc. has 11 operated units in the STACK after transferring 1 from the SCOOP. Six of those units are targeting the Meramec formation while 5 are targeting the Woodford formation in the Northwest Cana joint development area of the STACK.

Chesapeake Energy Corp.’s average operated count during the first quarter was 8, down from 14 in fourth-quarter 2015 and 54 in first-quarter 2015. Marathon Oil Corp. released its remaining unit in the Bakken during the first quarter. Gulfport Energy Corp. said it’s operating 3 horizontal rigs in the Utica.

Contact Matt Zborowski at

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