BHI: US rig count hot streak continues with 13-unit rise

A recent surge in the US rig count has included double-digit increases in 7 of the last 12 weeks.

The tally of active rigs during the week ended Dec. 16 rose by 13 to 637 on multiplying oil-directed rigs in the Permian basin, according to data from Baker Hughes Inc. The new total represents an increase of 233 since May 27. Last week, the count recorded a 27-unit rise, the largest since April 2014 (OGJ Online, Dec. 9, 2016).

All but one of those units were either oil-directed or in the Permian. Oil-directed units now total 510, up 194 since May 27. Gas-directed rigs edged up 1 unit to 126, up 45 since Aug. 26. One rig considered unclassified remains operational.

All 13 of the units are drilling on land, bringing that tally to 614. Those drilling horizontally increased by 9 to 512, up 198 since May 27. Directional drilling rigs gained 3 units to 54. Offshore rigs and those drilling in inland waters were static this week at 22 and 1, respectively.

The US onshore drilling segment this week was informed of the $1.76-billion acquisition by rig contractor Patterson-UTI Energy Inc. of wellsite services and equipment provider Seventy Seven Energy Inc., a move that will create a combined firm with 201 high-specification drilling rigs and a pressure pumping fleet with more than 1.5 million hp of hydraulic fracturing (OGJ Online, Dec. 13, 2016).

In Patterson-UTI’s third-quarter earnings report during late October, Mark S. Siegel, the firm’s chairman, said it believes the industry “has begun the initial stages of the recovery process, which began with smaller operators picking up rigs to drill less service intensive wells.”

Siegel said, “We believe the market has transitioned in favor of higher-[specification] rigs, and we are encouraged by the recent increase in demand that is increasing utilization for this class of rig, especially in markets such as the Permian basin. Overall, we believe the market for higher-spec rigs has appreciably tightened.”

Latest Permian movers, shakers

The Permian gained 12 units this week to 258, an increase of 124 since May 13. Meanwhile, two deals for Permian acreage were reported over the last few days as firms pursued premium positions in the southern Delaware basin.

The largest was Diamondback Energy Inc.’s $2.4-billion acquisition of Brigham Resources Operating LLC and its 76,319 net leasehold acres, marking the firm’s second deal for southern Delaware acreage after entering the region earlier this year (OGJ Online, Dec. 15, 2016). The firm now has 182,000 net surface acres in the Permian.

Diamondback believes it can support 15-20 active rigs overall in the Permian. The firm already is adding a sixth rig to its previously acquired southern Delaware position, and plans to add two more after the Brigham Resources deal closes.

In a relatively smaller move, Callon Petroleum Co. will enter the southern Delaware basin with its acquisition of 16,098 net acres from American Resource Development LLC for $615 million in cash (OGJ Online, Dec. 14, 2016). Callon expects to add an operated horizontal rig to the new acreage by mid-2017. On its existing Midland basin acreage, it plans to run 4 horizontal rigs by yearend 2017.

Anadarko Petroleum Corp. also confirmed that it’s added 2 rigs in each of its Delaware and DJ basin positions early in the fourth quarter. The firm plans to further increase activity in each area, expecting to end first-quarter 2017 with 14 operated rigs in the Delaware and 6 in the DJ, compared with 7 and 1 in the basins, respectively, at the end of this year’s third quarter.

Permian drilling outcomes

Several month of increased drilling in the Permian has brought about the proliferation of drilled but uncompleted (DUC) wells and growing crude oil production, according to data from the US Energy Information Administration.

The agency’s Drilling Productivity Report (DPR) released this week projects the basin’s January output to rise 37,000 b/d to 2.126 million b/d, offsetting a 23,000-b/d loss in the neighboring Eagle Ford to 980,000 b/d, and a 13,000-b/d loss in the Bakken to 905,000 b/d.

On the strength of the Permian, combined oil production from the seven major US onshore producing regions during January is expected to rise 2,000 b/d to 4.542 million b/d.

The DPR indicates the basin’s DUC well count in November rose for a fifth consecutive month, gaining 99 DUC wells to total 1,568. It was the only substantial increase of the major onshore producing regions.

For the week ended Dec. 9, crude production from the entire Lower 48 spiked 101,000 b/d from the previous week’s average, bringing overall domestic output—onshore and offshore—to 8.796 million b/d, down 380,000 b/d year-over-year, EIA also reported this week. It expects overall output to average 8.9 million b/d in 2016 and 8.8 million b/d in 2017.

Other Texas plays and beyond

Texas increased for a ninth consecutive week with a 14-unit rise this week to 258, up 144 since May 27. Outside the Permian, the Eagle Ford, Haynesville, and Granite Wash each edged up a unit to 44, 27, and 14, respectively.

The Eagle Ford, which has accounted for a large portion of the output decline from the major onshore oil producing regions, has gained 13 units since Oct. 14 as it attempts to pull out of the doldrums.

New Mexico, also home of the Permian, rose 2 units to 32, up 19 since Mar. 18. Colorado edged up a unit to 27, up 10 since Oct. 28.

North Dakota and its Williston each dropped a unit to 31. Oklahoma and Wyoming each lost 2 units to 78 and 18, respectively. The Cana Woodford fell 3 units to 34. The Arkoma Woodford and Mississippian each decreased a unit to respective totals of 4 and 3.

Oklahoma and the Woodford, however, will gain a new operator in the coming months after the closing of this week's deal by shale gas producer Gulfport Energy Corp., which is purchasing 46,400 net surface acres in the South Central Oklahoma Oil Province (SCOOP) from Vitruvian II Woodford LLC for $1.85 billion (OGJ Online, Dec. 14, 2016).

Gulfport plans to maintain the current 4-rig program on the acreage during 2017 and add 2 more rigs at the beginning of 2018.

Canada, meanwhile, posted another increase this week, albeit not nearly as large as those of the previous 2 weeks. Up 4 units to 234, its count has risen 198 units since May 6. Gas-directed rigs gained 4 units to 116, while oil-directed rigs edged down 1 to 116 as well. One rig considered unclassified came online, doubling that tally.

Contact Matt Zborowski at matthewz@ogjonline.com.

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