The US drilling rig count rose by double digits for the fifth consecutive week during the week ended Feb. 17.
Data from Baker Hughes Inc. shows the tally of active rigs gained 10 units to 751, an increase of 347 units since a modern era nadir of 404 touched last May 27 (OGJ Online, Feb. 10, 2017). In the last 2 months alone, the count has risen by 114 units.
Oil-directed rigs increased by 6 during the week to 597, up 281 units since May 27. Natural gas-directed units rose by 4 to 153, up 72 units since last Aug. 26. One rig considered unclassified remains operating.
Onshore rigs climbed by 13 to 730, with horizontal units up 7 to 614 and directional units up 6 to 72. The horizontal count has expanded by 300 since May 27.
The US offshore count dropped 3 units to 18 as it approaches lows not seen since the aftermath of the Macondo deepwater well blowout and crude oil spill. Three rigs remain drilling in inland waters.
Canada’s tally fell 21 units to 331, still up 295 since May 6. Oil-directed units dropped by 13 to 194, while gas-directed units decreased by 8 to 137.
Projected upward movement
Despite the recent rapid spike in rigs deployed in the US, analysts for financial services firm Raymond James & Associates Inc. maintain that “increased frac intensity per well and pressure pumping equipment attrition will constrain the industry's ability to respond to a rising oil price environment well into 2019.”
While RJA is raising its anticipated average US rig count in 2017 to 850 rigs working from 800 in its previous projection, the firm still believes the count will average 1,100 in 2018.
“Usually, any activity bottlenecks lead to materially higher prices for the oil services industry when excess cash is available to [exploration and production] companies,” RJA explained. “We believe oil field margins will likely surpass 2014 levels in select industries—such as pressure pumping—over the next year.”
RJA said it “conservatively” estimates the Permian will average 345 rigs during the 2017, rising to 437 in 2018. As for the major gas regions, the firm expects the Marcellus in 2017 to average 49, up 77% year-over-year; and sees the Utica increasing 100% year-over-year in 2017.
Texas torrent
The Texas count spiked 16 units this week to 378, up 205 since May 27. The Granite Wash stole the spotlight from the Permian with a 5-unit jump to 13. The Haynesville rose 3 units to 34, up 21 since Sept. 30. The Permian, Eagle Ford, and Barnett each gained 2 units to 303, 61, and 5, respectively. The Permian is up 169 units since May 13, while the Eagle Ford is up 32 units since June 3.
Given the Permian’s overall increased drilling activity, the US Energy Information Administration forecasts Permian oil production to rise 70,000 b/d month-over-month in March to 2.25 million b/d (OGJ Online, Feb. 13, 2017). As of January, the basin boasted a suite of 1,757 drilled but uncompleted (DUC) wells, an increase of 84 from the December total.
EIA projects the Eagle Ford to record a 14,000-b/d month-over-month increase in March to 1.077 million b/d, marking the South Texas region’s first rise in Drilling Productivity Report data since late 2015. Its tally of DUC wells during January gained 11 month-over-month to 1,255.
Utah was the only other oil- and gas-producing state to record an increase during the week, rising 1 unit to 6.
Oklahoma, North Dakota, and Alaska each dropped a unit to 101, 35, and 9, respectively. The Cana Woodford dropped 2 units to 49, and the Williston was down 1 to 36. New Mexico fell 2 units to 48. Accounting for the US offshore decline, Louisiana decreased 3 units to 51.
All in on Permian in 2017
Several of the major Permian operators have reported plans to continue ramping up rig deployment throughout the year, particularly those with newly acquired Delaware and Midland basin acreage on which to drill.
Fresh off its purchase of Clayton Williams Energy Inc., Noble Energy Inc. plans to exit the year with 6 rigs working in the Delaware basin. The firm increased its operated rig count on its existing position to 3 during fourth-quarter 2016 and expects to continue running 3 on that acreage during 2017. On the Clayton Williams acreage, Noble expects to add a second operated rig midyear and a third by yearend.
Pioneer Natural Resources Co. plans to operate 18 horizontal rigs in the Spraberry-Wolfcamp in 2017, with 14 in the northern area and 4 in the northern portion of the southern Wolfcamp joint venture area.
Upon announcing last week a deal to expand its Midland basin position, pure-play Permian operator Parsley Energy Inc. said it will have a “sufficient acreage footprint to support more than 20 rigs focused on horizontal development.”
The firm plans to add 4 rigs to its Permian acreage by yearend, which is expected to result in 40 incremental horizontal well spuds, with 10 put on production this year. All of the incremental wells would be in the Midland basin (OGJ Online, Feb. 9, 2017).
Another pure-play Permian firm, Diamondback Energy Inc., said it will be able to support 15-20 rigs after the expected completion in February of its acquisition of Brigham Resources Operating LLC and Brigham Resources Midstream LLC.
Diamondback in January added a sixth operated horizontal rig to begin development on its previously acquired southern Delaware basin acreage—its first rig in the region—and the firm plans to add 2 more rigs in the southern Delaware after the Brigham deal closes.
Callon Petroleum Co. officially entered the southern Delaware basin this week with the closing of its purchase from American Resource Development LLC. The firm is preparing to add a dedicated horizontal unit to the newly named Spur operating area by midyear, bringing Callon’s Permian rig count to 4.
Matador Resources Co. plans to add a fifth operated rig in the Delaware basin beginning early in the second quarter, maintaining that total through yearend. The rig will begin drilling in the firm’s Rustler Breaks area, where 3 units will be primarily operating during the year. Of the 2 other units, 1 will be primarily in the firm’s Wolf area, and the other primarily in its Arrowhead and Ranger areas.
Contact Matt Zborowski at [email protected].
