With oil-directed rigs representing two thirds of the decline, the US drilling rig count fell 18 units to 619 during the week ended Jan. 29, the latest Baker Hughes Inc. data show (OGJ Online, Jan. 22, 2016).
The overall count is down 924 year-over-year and the lowest since Aug. 6, 1999.
Mired in a complex regulatory review process for its pending merger with Halliburton Co. while struggling through depressed crude oil prices, BHI during 2015 suffered a steep drop in earnings, a direct reflection of plunging rig counts.
In the oil field services firm’s yearly results posted this week, Martin Craighead, BHI chairman and chief executive officer, forecasted more pain in 2016 for the worldwide drilling industry.
“At current commodity prices, the global rig count could decline as much as 30% in 2016, as our customers’ challenges of maximizing production, lowering their overall costs, and protecting cash flows are now more acute,” he said.
Meanwhile, BHI and Halliburton “intend to continue their discussions with the DOJ and other competition agencies that have expressed an interest in the transaction, and remain focused on completing the merger as early as possible in 2016,” BHI said.
Oil rigs recapture larger share of losses
Oil-directed rigs lost 12 units this week to 498, down 725 year-over-year and the lowest total since Mar. 26, 2010.
Gas-directed rigs had assumed the larger share of the overall US decline during the last 2 weeks, but relented this week by shedding 6 units to 121, down 198 year-over-year and the new lowest level in BHI data that dates back to July 1987.
Land-based rigs dropped 17 units to 590, down 892 year-over-year. Rigs engaged in horizontal drilling lost 13 units to 487, down 681 year-over-year and the lowest count since Oct. 23, 2009. Directional drilling rigs fell 2 more units to 58.
Canada’s rig count ended its 3-week hot streak—during which time it shot up from 83 to 250 units—declining 19 units this week to 231, down 163 year-over-year.
Gas-directed rigs took the largest share, dropping 11 units to 105. Oil-directed rigs in Canada, the primary source of the recent gains, shed 8 units to 126, still up 114 from its count at yearend 2015.
Declining Gulf of Mexico activity
Two rigs dropped offshore Louisiana, partially offset by 1 unit dropping in Texas waters, bringing the overall US offshore count to 28. One rig remains operating in inland waters.
Murphy Oil Corp. reported this week that it has cancelled contracts for 2 deepwater rigs in the gulf, resulting from “a severe drop in commodity prices causing Murphy to plan for a significantly lower capital spending program in 2016, lack of partner support for continued drilling, and no available farmout opportunities.”
Raymond James & Associates Inc. noted in a Jan. 28 industry brief that the rigs appear to be Transocean Ltd.’s Discoverer Deep Seas ultradeepwater drillship and Diamond Offshore Drilling Inc.’s BlackRhino ultradeepwater drillship.
The global cold-stacked rig count stands at 143 units, up from 93 at the start of 2015. The global rig fleet is 1,018 units, of which just 560 are actively drilling.
Permian dives, New Mexico hits new low
Texas led the major oil-and gas-producing states with a 13-unit decline to 281, down 414 year-over-year and its lowest count since Mar. 17, 2000. The Permian dived 17 units to 182, down 272 year-over-year. The Granite Wash and Barnetteach dropped a unit to settle at respective totals of 13 and 3.
New Mexico fell 4 units to 26, down 61 year-over-year and the state’s lowest total since BHI began tracking states’ weekly rig counts in January 2000. Also at its lowest count in BHI data, Louisiana lost 3 units to 51.
North Dakota, Pennsylvania, and Kansas each dropped a unit to 44, 22, and 9, respectively. North Dakota’s count, down 99 year-over-year, remains its lowest point since Aug. 21, 2009; and Pennsylvania’s count, down 32 year-over-year, is its lowest since Feb. 6, 2009.
Two more onshore US exploration and production firms, both of which happen to be major Bakken producers, said this week that they’re reducing their rig counts in 2016 amid planned reductions in capital expenditures.
Continental Resources Inc., which recently decreased its operated rig count to 19 from 23 by dropping 4 rigs in Bakken, anticipates an average of 19 operated drilling rigs for the year, with 4 in the Bakken, 5-6 in the SCOOP play in Oklahoma, 5 in the Northwest Cana Joint Development, and 4-5 in the STACK play in Oklahoma (OGJ Online, Jan. 26, 2016).
Hess Corp. said it plans to operate 2 rigs and bring online 80 new wells in the Bakken in 2016; and drill five wells and bring 14 new wells online in the Utica in the first quarter, after which the rig will be released (OGJ Online, Jan. 26, 2016).
Three states posted increases this week. Oklahoma edged up a unit to 85, with the Mississippian also edging up a unit, settling at 11. Colorado rose 2 units to 22, reflecting a 2-unit increase in the Niobrara to 21. Alaska gained 2 units for the second straight week, now totaling 13.