The overall US oil and gas drilling rig count recorded its smallest decline of the year thus far, shedding just 2 units—both targeting gas—to settle at 404 rigs working, according to Baker Hughes Inc. data.
However, it marked the 22nd consecutive week and 37th of the past 39 weeks in which the count has fallen (OGJ Online, May 13, 2016). Since the overall drilling dive commenced following the week ended Dec. 5, 2014, the overall count has fallen 1,516 units (OGJ Online, Dec. 5, 2014).
Moody’s Investors Service reiterated this week that it believes land-based drillers in North America will be among the last to recover in the oil field services industry (OGJ Online, May 6, 2016).
“As commodity prices rise over the next couple of years, we expect that upstream companies will prioritize fixing their balance sheets and fracture uncompleted wells before spending money on drilling and entering into new contracts,” the rating agency explained.
“With rigs widely available, E&P companies will be slow to demand enough to boost prices for land drilling,” Moody’s said. “The recovery for land drillers will lag those of commodity prices, upstream producers, and even [oil field] service companies such as pressure pumpers.”
Oil and gas consulting service Rystad Energy estimates that US shale operators have accumulated 3,900 drilled but uncompleted (DUC) horizontal oil wells with more than 90% in major liquids plays (OGJ Online, May 19, 2016).
The firm estimates that 1,200 wells await completion services in the Permian, 1,000 in the Eagle Ford, 850 in the Bakken, and 620 in the Niobrara, with another 270 spread across other regions.
The US Energy Information Administration, meanwhile, reported this week that US crude oil production declined 11,000 b/d to 8.79 million b/d during the week ended May 13 (OGJ Online, May 19, 2016).
Oil rigs end recent slide
After losing 10 units last week in its eighth straight week of losses, the US oil-directed rig count sat unchanged at 318 during the week ended May 20.
The count remains down 1,291 units since its peak in BHI data on Oct. 10, 2014, and at its lowest level since Oct. 23, 2009, but still well-above the 2008-09 downturn’s bottom of 179 recorded on June 5, 2009.
US gas-directed rigs have fallen to their latest low point in BHI data, dropping 2 units to 85.
Land-based rigs lost 7 units to 375, down 478 year-over-year. Rigs engaged in horizontal drilling edged down a unit to 314, down 1,058 since a peak in BHI data on Nov. 21, 2014, and their lowest count since Nov. 22, 2006. Directional drilling rigs jumped 4 units to 42.
Rigs drilling in inland waters jumped 3 units to 5. Offshore rigs gained 2 units to 24.
Canada’s rig count rose for the second straight week after falling in the previous 14 weeks. Edging up a unit, the country now totals 44 rigs working, still down 206 units since Jan. 22, the last time its count posted consecutive weekly gains.
That 1 unit was gas-directed, bringing that tally to 27. Oil-directed rigs and rigs considered unclassified in Canada remained unchanged at 16 and 1, respectively.
Texas, Barnett lead regional losses
Texas one-upped its tally of rigs lost last week by leading the major oil- and gas-producing states with an 8-unit drop this week to 173 rigs working, down 785 since a peak in BHI data on Aug. 29, 2008, and the state’s new low point in BHI data that dates back to the 1990s.
Rigs in the Barnett shale gas region of North Texas continue to hover just beyond extinction, declining 3 units this week to a total of 2, down 82 from a recent high reached on Apr. 22, 2011. In South Texas, the Eagle Ford fell for a sixth straight week, dropping 2 units to 31, down 228 since a peak on May 25, 2012. The only rig operating offshore Texas stopped work.
The West Texas Permian, meanwhile, jumped 3 units to 137, still down 431 since a recent peak on Dec. 5, 2014. More oil production declines are forecast from the play in the coming months.
In its latest Drilling Productivity Report (DPR), EIA projects the crude oil production decline in the Permian to grow to 10,000 b/d in June to 2.02 million b/d, marking the third consecutive month in which the basin has been projected to record a loss (OGJ Online, May 16, 2016). EIA still forecasts the largest portion of the overall US monthly drop to come in the Eagle Ford, which is expected to fall 58,000 b/d in June to 1.21 million b/d.
North Dakota and Kansas were the only two other states to post losses this week, each declining a unit to 23 and 3, respectively.
North Dakota is now down 180 units since an all-time high during June 1-8, 2012, and at its lowest level since Dec. 30, 2005. Mirroring activity in its home state, the Williston also was down 1 to 23. Monthly oil output from the Bakken is projected to drop 28,000 b/d in June to 1.02 million b/d, according to the DPR.
Oklahoma and Colorado each edged up a unit to respective totals of 57 and 16. Oklahoma is still down 152 units compared with when it entered 2015, and at its lowest point in BHI data that dates back to the 1990s. The Mississippian dropped 2 units to 3, while the Cana Woodford gained 2 units to 29. The DJ-Niobrara gained a unit to 13. EIA projects June oil output from the Niobrara to drop 15,000 b/d to 391,000 b/d.
Louisiana, which in recent weeks also has hit its lowest levels in BHI data that dates back to the 1990s, jumped 7 units this week to 47, reflecting 3 offshore units coming online, 3 in inland waters starting work, and a second consecutive 1-unit increase in the Haynesville to 14.
Contact Matt Zborowski at firstname.lastname@example.org.