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North American Rig Count Breaks 1,000 as Oil Rigs Added
Joe Fisher - July 2, 2015
The North American rig count stepped up by seven in the tally released by Baker Hughes Inc. on Thursday, one day early because of the holiday. That was enough to push the census to 1,001 for the continent for the week ending July 2.
In the United States, a net of three rigs returned to action with four returning to land operations and two leaving inland waters; one rig was added in the offshore. Clearly, oil was favored as 12 oil-directed rigs were added while nine natural gas-directed rigs were lost. This scenario has been flip-flopping in recent counts; sometimes gas rigs are added and oil rigs are dropped.
The Eagle Ford Shale and the Williston Basin each added three rigs. But giving up one each were the Ardmore Woodford, Denver-Julesburg/Niobrara, Fayetteville and Marcellus shales, and the Mississippian Lime. The Granite Wash, Permian Basin and Utica Shale each added a rig, as did the Barnett Shale and Cana Woodford.
North of the border the story was the opposite. Canada added eight gas-directed rigs but lost four oil-directed units. Seven rigs were added in Alberta, and one was added in British Columbia. Manitoba now has one rig running, up from zero, and Saskatchewan lost five rigs.
Analysts at Barclays Commodities Research in a recent note gave a nod to the disconnect in rig count and well completions and acknowledged that it's hard to get a fix on real-time producer activity. Completions in the Permian Basin are down from a year ago, they said, due to a decline in activity and a shift from vertical to horizontal rigs. This means fewer, more productive wells per deployed rig.
In the Eagle Ford Shale, oil well completions year to date are about 67% of year-ago levels, Barclays said. However, wells here are more productive, too.
North Dakota completion activity has been volatile, hitting a high in March not seen since last August but apparently trending downward since, Barclays said.
"The increased focus on productivity and the potential for accelerated well completions could support production in the near term, but the effects of the lower rig count should eventually become apparent (assuming no additions)," the analysts said.
BENTEK Top Stories
Southeast/Gulf/Texas Observer (Weekly)
Special Feature: Texas Rig Decline May Have Bottomed
The decline in drilling rigs in Texas producing areas appears to have stopped. Total rigs operating in Texas averaged 408 in June, a 57% decline from last October, but a 14-rig build over May, marking the first sign that the decline in drilling activity may have bottomed. Vertical rigs now make up approximately 23% of the total Texas drilling fleet, having fallen from around 33% in 2014, whereas horizontal rigs now make up nearly 73% of the fleet, up from 64% in 2014. Despite the massive decline in drilling activity, Texas production has remained fairly robust. Total sample production receipts averaged just under 7.3 Bcf/d in June, down 0.5 Bcf/d from February highs, but still maintaining a 0.3 Bcf/d build over the 2014 average, while Texas gas inventories have continued to fill at record rates over the last year. Inventories were estimated at 374 Bcf at the end of June, a 24-Bcf surplus to the five-year average.
The total U.S. rig count fell nine to reach 700 rigs in the five-day period ended Dec. 23, according to Baker Hughes Inc.'s latest North America Rotary Rig Count, released two days early ahead of the Christmas holiday on Dec. 25. The U.S. rig count is 1,140 below the year-ago level and at the lowest level since the week ended Sept. 10, 1999.
The number of U.S. rigs targeting natural gas was down six on the week to 162, or 178 below the year-ago number. Natural gas rigs are now at their lowest level ever seen in Baker Hughes records that go back to July 1987.
The U.S. oil rig count fell three on the week to total 538 and was down 961 from the same week a year earlier after hitting a better-than-five-year low two weeks ago.
The North American rig count was down 45 and reached 826 in the five days ended Dec. 23. The count is down 1,270 rigs from last year. Canadian rigs were down 36 to reach 126 and were down 130 from the same week last year.
U.S. land rigs were down nine from last week to 675 and were 1,095 below last year's level. Inland water rigs and offshore rigs were unchanged on the week at one and 24, respectively, off 11 and 34 from a year earlier.
By trajectory, horizontal rigs were down five from the previous week to reach 554, or 796 rigs below the same week last year. Directional rigs saw a three-rig decline, sinking to 60, and were 121 below a year ago. Vertical rigs were down one to reach 86 and were 223 below the corresponding week in 2014.
Pathetic Paid Pumper, Penguin aka Bill Power - BP- aka Murphmay
How's the book selling goin, btw?
Thanks to Romed's post today in another thread, here is another explanation for you clown town peeps...
Just to make it crystal clear that you pumpers were not only completely idiots and ignorant but, also tried to manipulate -all you can with your broken trumpets- to sell the books that's not worth even as a roll of toilet paper.
Plummeting Rig Counts: How Low Can They Go, and Should We Care?
April 6, 2016 | By Charles Nevle
Another week – another drop in the U.S. rig count. The rig count for the week ended April 1 is down to just 450, a drop of 14 from the prior week. If that sounds low, it is. In fact, it's the lowest total in the history of the count, which dates all the way back to 1944, according to Baker Hughes.
However, conventional wisdom for some time now has been that rig counts don’t really matter. This wisdom is based on the evolution of rig productivity. As technology improves, there is no comparison between the rigs of several years ago and the rigs of today, which are drilling supercharged wells benefiting from horizontal drilling, multi-stage fracking and extremely long laterals -- among the many technological innovations that have come to fruition.
Since their peak in October 2014 of over 1,930 rigs, we’ve seen rig counts fall by an amazing 77%. Think about that: We are operating with only 23% of the rigs which were active just 18 months ago. And yet, over that 18 months, production continued to grow.
Rig Counts and Dry Gas Production
So, even as rigs fell, efficiency gains have allowed production to continue to grow. One way to see this is to look at the number of wells drilled per rig.
Wells Per Rig Increase with Rig Decline
As rigs have declined, the number of wells drilled per rig have increased. Operators are doing more with less, operating with the best crews and focusing on known areas to maximize the productivity out of each dollar in capital expenditures. Gone are the days of experimenting with peripheral sub-plays.
We also see this in the data on productivity from each well. As operators move to the best areas with the highest production potential, the average amount of gas from each new well is also increasing. For example, let’s look at PointLogic’sEagle Ford Dry Producing Area.
Productivity Per Well Increases as Rigs Decline
As rig counts in the Eagle Ford Dry producing area declined from around 35 to 15, the productivity of the average well as measured by the 2nd month of production increased from about 2.7 million cubic feet per day (MMcf/d) to over 4 MMcf/d. That is an enormous increase per well and certainly helps offset the reduced drilling activity in the area. In fact, Eagle Ford Dry production as a whole has basically remained flat even as rigs have declined to now fewer than 10.
So, the question becomes, how long can these increases in productivity last? How long can plays like the Eagle Ford maintain production as rig counts continue to drop?
The answer, we believe, is not much longer -- the blood has been squeezed out of the productivity turnip, so to speak. We believe that producers have moved beyond doing more with less and are now entering the stage of doing less with less.
We see this in the big picture of lower 48 production, with production having peaked in February at 74.7 billion cubic feet per day (Bcf/d) and now hovering around 73.5 Bcf/d. That’s fine from a supply and demand perspective because production declines are necessary due to the large excess of gas in storage. But as we discussed in A V-Shaped Production Outlook for Natural Gas Production and Prices, the market will soon begin clamoring for an increase in gas production. That increase cannot be met with the current rig count, and thus rigs will need to increase, perhaps substantially.
In late 2016 and throughout 2017, higher and higher production levels will be necessary to satisfy increasing demand from LNG exports, Mexican exports and natural gas fired power generation. Our colleagues at IHS expect that the U.S. may need to increase the rig count by 200 (or 44% from where it stands this week) just by the end of this year and over 200 more throughout 2017 to meet expected demand increases. This increase would represent nearly a doubling of the current rig count by January 2018.
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The prospect of this kind of turnaround should be welcome news to producers, service companies and related equipment providers. However, significant challenges will be faced by these industries as they are signaled to respond. More drilling crews, fractionation crews, truck drivers and all the rest of the manpower, expertise and equipment will need to be called back into service. Some in the industry believe this is easier said than done, that the folks laid off or idled during this downturn will be difficult to bring back.
The U.S. labor market as a whole is very healthy - wages are up and unemployment is down. According to a recent Reuters article, unemployment is near an eight-year low of about 5%, and wages rose 2.3% compared with a year earlier. In other words, the work force hurt by the downturn in oil and gas prices has been released into an economy that provided alternative opportunities, in theory anyway.
This fall, the market should regain its balance: production is down, demand is strong and the prospect of significant demand uptick is on the horizon. Now what the market needs is a rebound, but how do we make it happen? Producers will need to deploy more capital, which means going to banks that may be a little reluctant to jump in. Many shale producers are outspending their cash flow, which will make it very challenging for them to raise capital to fund the new drilling that the market will need in 2017. Producers, operators and service companies will need to lure back workers who may be inclined to demand some sort of guarantee before signing on.
All of this leads to one thing – higher prices for natural gas. That's the lever that will need to swing the pendulum in the other direction. The signal prices will need to send cannot be subtle.
PointLogic forecasts that dry gas production will need to increase to over 80 Bcf/d by the end of 2017 (in an environment with rig counts at their lowest level since at least 1944). This turnaround will not really be signaled for several months, so we still will likely see downward pressured gas prices, which will beget a continuing rig count drop, further cuts in the workforce, and additional bankruptcies of producers and service companies alike. In other words, we know the pendulum has to swing strong the other way, but momentum continues to push it the other direction, which makes the coming turnaround that much more difficult.
Some might point to breakeven costs and maintain that all prices need to do is get to a point that puts plays like Haynesville in the money, and then the market will be fine – plenty of gas at that price. That may be true in a frictionless market, but this market is anything but frictionless. For a long time the friction has been on the side of maintaining production increases, no matter how low prices moved, no matter how badly rig counts were decimated.
Now, we are moving to the other side where prices will have to rise, perhaps higher more than a theoretical economic breakeven. We won’t get there for several months, but it is coming. In the meantime, PointLogic is projecting a very interesting summer to churn through. Stay tuned as we monitor developments in this very interesting and historic market.