OGJ Washington Editor
WASHINGTON, DC, Jan. 14 -- Fewer US oil and gas wells were drilled in 2009 than in 2008, but the pace of activity grew during last year’s final 6 months, the American Petroleum Institute reported.
The estimated 39,068 oil and gas wells and dry holes completed last year in the US was 37% lower than 2008’s total, API said as it released its latest quarterly US drilling statistics. But the 10,609 completions during the fourth quarter were 19% higher than the third quarter, which in turn was 6% higher than the second quarter, it added.
“We are currently seeing US drilling activity picking up with the economic recovery,” said Hazem Arafa, API’s statistics department director. “But there is still a long way to go before activity begins to near the pace of 2008, which was helped by strong commodity prices.”
“The rise of unconventional natural gas and the future growth of shale is the macro story,” said Frederick Lawrence, vice-president of economics and international affairs at the Independent Petroleum Association of America.
“Gas is still over 60% of the wells drilled. It’s the critical mass going forward, based on the available US resource base. Tactically speaking, however, oil has had its short-term victories over the last year,” Lawrence observed.
Certain analysts were not surprised by API’s findings. Mark S. Urness, who follows oil and gas for Calyon Securities (USA) Inc. in New York, noted, “It’s not a surprise that completions were down 37% from last year since the rig count was down 39.4%. There were a lot of wells drilled but not completed.”
Lawrence said, “Horizontal drilling is increasingly becoming the norm. You look at Baker Hughes’s numbers and horizontal drilling is about 48% of total wells drilled, compared to 26% 2 years ago. Directional drilling is about 26%, compared to 16%.”
More than 1,500 wells were not completed late last year because gas prices were depressed and storage levels were high, Lawrence told OGJ. Urness said, “The colder temperatures have helped reduce the storage surplus to within 5% of the 5-year average. With prices around $6[/Mcf], we should start to see completions pick up going forward.”
For 2009, the estimated number of exploratory wells fell by half, to 1,887, while the number of development wells dropped 38% to 32,490. For the fourth quarter, the number of exploratory wells plunged 58% from the comparable 2008 quarter to 411, while the number of development wells fell 35% year-to-year, the report said.
Natural gas was the primary 2009 domestic drilling target, with an estimated 18,269 wells completed. The gap between the number of oil and gas wells narrowed somewhat, API said. While the number of gas wells drilled was 42% less in 2009 than in 2008, the number of oil well completions fell 35% to 16,108 wells.
Oil price strength
Lawrence said 2009 will be the first year US oil production has risen since 1990 or 1991. “You look at [US Energy Information Administration price] projections and it’s not surprising that a lot of producers switched to oil if they could. Its prices held up better than gas,” he told OGJ.
He said independent producers such as EOG Resources Inc. have made strategic transitions from gas toward oil the past few years. “Its significant presence in the Bakken shale has given its portfolio a degree of depth in addition to its unconventional shale assets,” the IPAA official said.
Urness said, “There’s a lot less exploration and more development going on. There’s also a continued shift to oil drilling, with more completions. If you’re drilling an oil well, you’re more likely to complete it because you don’t have hydraulic fracturing and horizontal drilling expenses increasingly associated with gas.”
Lawrence noted, “The ratio of oil to gas is around 35 to 64%. Two years ago, in January 2008, it was around 19 to 81. That’s a pretty big difference as the market has moved back toward oil to take advantage of the relatively higher commodity price.”
API also reported total estimated footage of 234,982,000 ft during 2009, 44% less than 2008. For the fourth quarter, estimated footage drilled stood at 57,566 ft, 51% less than in 2008’s final 3 months, it said.
Contact Nick Snow at email@example.com.
API: US drilling activity falls 37% in 2009