The overall US drilling rig count began the year with its largest decline since last April, plunging 34 units to 664 during the week ended Jan. 8, according to Baker Hughes Inc. data (OGJ Online, Dec. 31, 2015).
The new total is the lowest since Aug. 20, 1999, and down 1,086 year-over-year.
BHI also reported that the average US rig count for December was 714, down 46 from November and down 1,168 from December 2014.
In an industry brief published this week, financial services firm Raymond James & Associates projects the overall US rig count to lose 150 more units during the first half of the year, bottoming out at 550 in June.
RJA then sees a moderate recovery, with just more than 200 rigs coming online from June to December. On a year-over-year average basis, RJA expects the 2016 count to average 620, down 355 compared with the 2015 average.
The recovery is expected to accelerate at the beginning of 2017, adding 463 units on average for the year compared with the previous year’s average “as new capital budgets are set in a higher oil price environment,” the firm forecasts. “However, growth in the rig count is likely to lag cash flow growth significantly, as labor and service availability likely becomes a major constraint on the ability to meet activity demand.
“This should be compounded by oil field service pricing increases as the market for services gets tighter,” RJA explained. “As such, we expect a portion of these rigs to be deferred to 2018, when we expect to add another 275 rigs on average, year-over-year.”
Oil rigs down 20
During the week, oil-directed rigs dropped 20 units to 516, down 905 year-over-year and their lowest total since Apr. 30, 2010. Gas-directed rigs lost 14 units to 148, down 181 year-over-year.
Two rigs went online offshore Louisiana, boosting the overall US offshore count to 27. One rig drilling in inland waters began operating, doubling that total to 2.
Land-based rigs plunged 37 units to 635, down 1,049 year-over-year. Rigs engaged in horizontal drilling decreased 30 units to 519, down 782 year-over-year and their lowest level since Nov. 13, 2009. Directional drilling rigs gained 4 units to 64.
Texas led the major oil- and gas-producing states with a 13-unit decline to 308, down 502 year-over-year and its lowest count since Apr. 12, 2002.
The Permian led the basins with an 8-unit loss to 209, down 293 year-over-year. The Eagle Ford placed second with a 5-unit drop to 71, down 126 year-over-year. The Granite Wash declined 3 units to 12.
Pioneer Natural Resources Co. said this week that it expects to continue operating 18 horizontal rigs in the Spraberry-Wolfcamp during 2016 because well returns in the area remain positive in the current commodity price environment (OGJ Online, Jan. 7, 2016).
The company’s horizontal rig count in the Eagle Ford, meanwhile, is being reduced to 4 rigs in January 2016 from 6 rigs in 2015, and could potentially decrease further as the year progresses if low commodity prices continue to adversely affect well returns, PNR said.
The company continues to forecast compound annual production growth of more than 15%—with oil growth of more than 20%—during 2016-18, assuming the addition of 2-3 rigs/year during 2017-18.
Oklahoma, North Dakota, and New Mexico each fell 4 units this week to 83, 49, and 34, respectively. North Dakota, down 113 year-over-year, settled at its lowest total since Oct. 9, 2009. New Mexico, down 61, year-over-year, is at its lowest total since May 15, 2009.
The Williston dropped 4 units to 49, down 122 year-over-year. The Cana Woodford decreased 2 units to 36.
West Virginia lost 3 units to 12. Pennsylvania, Colorado, and Alaska each dropped 2 units to respective totals of 25, 22, and 9. Pennsylvania’s count is its lowest since Feb. 27, 2009, while Colorado’s count is its lowest since Nov. 27, 2002.
The Marcellus fell 4 units to 37, down 40 year-over-year.
Wyoming, Kansas, and Arkansas each dropped a unit to 16, 11, and 0, respectively. The 1 unit to go offline in Arkansas was in the Fayetteville, also now at 0.
Avoiding this week’s downward momentum to remain unchanged were Ohio at 14, California at 7, and Utah at 3.
Louisiana was the only state to post an increase, edging up a unit to 59.
Canada shoots up, but global losses continue
Canada began the year positively, posting its largest rise since January 2015. After plummeting 101 units during the previous 5 weeks, its count doubled during the week ended Jan. 8, spiking 83 units to 166, down an even 200 year-over-year.
A majority of the rigs to come online during the week were oil-directed, which jumped 59 units to 71, down 110 year-over-year. Gas-directed rigs gained 24 units to 95, down 90 year-over-year.
The average Canadian rig count for December was 160, down 18 from November and down 215 from December 2014.
The worldwide rig count for December was 1,969, down 78 from November and down 1,601 from December 2014.
Outside of North America, most monthly losses came in Latin America, where 14 units went offline to settle at a total of 270, down 99 year-over-year. Argentina dropped 10 units month-over-month to 91, and Colombia dropped 3 units to 12. Mexico, meanwhile, gained 4 units to 42.
A 10-unit decline in the Asia-Pacific region to 198 most notably reflected a loss of 3 units offshore China to 25, and 5 units in India to 100.
Europe jumped 6 units to 114, with Germany doubling to a total of 6, and Norway also gaining 3 to 17. Offshore UK lost 3 to settle at 9.