The US drilling rig count fell 48 units—markedly fewer compared with declines in recent weeks—to settle at 1,310 rigs working during the week ended Feb. 20, Baker Hughes Inc. reported.
That total is the lowest since Jan. 22, 2010, and 461 fewer units compared with this week a year ago. The count has now fallen 12 consecutive weeks, losing 610 units during that time (OGJ Online, Dec. 5, 2014).
In analysis releases this week, Wood Mackenzie says it expects a continued decline in land rigs through the first half of the year, leveling off at 1,000 units by August. The pace of land rigs being idled will continue to accelerate, with the first two weeks in February seeing another 200 rigs coming off contract.
“The oil price collapse is hitting onshore activity and rig operators, drilling rigs are currently being stacked at an alarming rate,” said Scott Mitchell, WoodMac research director.
Underlying the rig count forecast is WoodMac’s outlook for oil prices to recover during the year from the lows seen in early 2015, with an annual average of $53.25/bbl for West Texas Intermediate.
However, if WTI prices are sustained in the $40–50/bbl range, then the impact on the rig count will be even more severe, dropping to less than 900 by the summer, WoodMac forecasts. That represents a 50% cut in the number of operational US land rigs from the November 2014 peak.
The analysis is based on WoodMac’s forecast for oil prices to recover to an annual average of $64/bbl for 2016.
“The resulting impact on the rig market is a slow but steady recovery, averaging an additional 15 rigs/month through the end of 2016,” Mitchell said.
One of the primary consequences of the declining demand for rigs is a lowering of rig day rates, WoodMac says. In 2014, a high-spec horizontal rig could demand a contract rate of $27,000/day. WoodMac expects this to drop by as much as 30% in 2015 to an average day rate of $19,000/day.
“The rig contractors will clearly suffer in such an environment and those with the newest fleets, loaded towards horizontal walkable rigs, will fare better than their competitors,” Mitchell said.
Meanwhile, WoodMac says the outlook for US independents in this environment is mixed as budget cuts will lead to fewer wells being drilled and completed. However, service and equipment costs are reducing, allowing activity to continue in areas which would otherwise be rendered subeconomic.
Weekly roundup
During the week, all 48 units lost were land-based, bringing that total to 1,250. A 2-unit loss by rigs drilling in inland waters to 6 was offset by a 2-unit gain in offshore rigs to 54.
As with every other week since Dec. 5, oil rigs represented a vast majority of the declines. Down 37 units this week to 1,019, the total has fallen 556 units since that time.
Gas rigs were down 11 units to 289. Rigs considered unclassified were unchanged at a total of 2.
Rigs engaged in horizontal drilling fell 46 units to 979, the lowest total since Jan. 28, 2011. Since Nov. 21, 2014, 393 units have gone offline. Rigs drilling directionally, meanwhile, gained 5 units to 128.
In Canada, a 22-unit loss to 360 consisted of a 14-unit drop in oil rigs to 184 and an 8-unit drop in gas rigs to 176. Canada now has 272 fewer rigs working compared with this week a year ago.
Major states, basins
As would be expected, Texas led the major oil- and gas-producing states in losses, giving up 22 units to 576, a total that’s 270 fewer compared with this week a year ago and the state’s lowest since Feb. 26, 2010.
The Permian lost 6 units to 362 while the Eagle Ford lost 4 units to 160.
Oklahoma’s 16-unit fall to 155 nearly caught neighboring Texas. The Mississippian also lost 6 units, settling at 48.
North Dakota and Wyoming were tied at a distant third, each losing 4 units to 119 and 35, respectively. The Williston fell 5 units to 123.
Alaska relinquished 3 units to 7. Colorado fell 2 units to 47, its lowest total since Jan. 29, 2010. California and Utah each edged down a unit to 15 and 11, respectively. For California, its 15 rigs working is the state’s fewest since May 30, 2003. The state had 43 units as recently as Dec. 19, 2014.
Unchanged from a week ago were Pennsylvania at 54, Ohio at 37, Kanas at 18, West Virginia at 17, and Arkansas at 11.
Two states reported gains. New Mexico shot up 6 units to 72 while Louisiana edged up a unit again to 109.
