Oil rigs on the rise

Sept. 12, 2011
Oil & Gas Journal tracks and reports each week US drilling rig count data, by state, as well as monthly data for international rig counts, by country.

Oil & Gas Journal tracks and reports each week US drilling rig count data, by state, as well as monthly data for international rig counts, by country. Baker Hughes Inc. has been supplying active US and Canadian rotary rig counts to the petroleum industry since 1944. International statistics have been accounted for since 1975.

Baker Hughes' weekly report that was released on June 24 noted that the rig count for active rigs drilling in the US hit a new milestone: Active oil rigs hit 1,003 units.

This is the first time since the company's tracking the split of oil and gas rigs that the number of oil rigs reached the 1,000 unit mark. Each subsequent week, there has been a steady incline through the end of August.

For week ended Sept. 2—the latest report as OGJ went to press last week—Baker Hughes reported 1,064 active oil rigs in the US, down 5 units from the previous week. However, this number was slightly above the monthly average of 1,055 set in August. US oil rigs were up 399 from a year ago, an increase of 60%.

Storm watch

Despite the impending Tropical Storm Lee heading to the Gulf Coast last week, offshore oil rigs in that region only saw a decline of 1 fewer rigs being drilled compared to the week before.

The US Bureau of Ocean Energy Management, Regulation, and Enforcement reported on Sept. 2 that of the 62 total rigs operating in the gulf, only personnel from 16 rigs were evacuated.

BOEMRE, formerly called the US Minerals Management Service, is responsible for overseeing the safe and environmentally responsible development of energy and mineral resources on the Outer Continental Shelf.

Baker Hughes reported on Sept. 2, that there were 31 active oil rigs in the gulf. Four oil rigs accounted for in Texas waters and 27 offshore Louisiana. Though numbers for the gulf were unaffected due to the Tropical Storm Lee, oil rigs in the gulf represent only 3% of total active oil rigs in the report.

Oil:gas ratio

Typically the number of rigs being utilized ebbs and flows with the upward and downward movement of oil and gas prices. With oil prices on the slow and steady rise since mid-2009, drilling activity has followed suit. Higher oil prices compared with gas have stimulated a rise in the oil:gas price ratio.

The US Energy Information Administration calculates this ratio by dividing the Brent spot price ($/bbl) by the Henry Hub spot price of gas ($/MMbtu). "The ratio between the spot prices of crude oil and natural gas is a measure of the market's relative valuation of these two fuels," EIA said.

From 2004 to 2008, oil:gas ratios were low at an average rate of 9. The current ratio, based on data from Thomson Reuters, is averaging close to 30. September 2009 saw a high point of 36 based on a rise in oil prices and lower gas prices due to the increase in shale gas supplies.

Thus the current higher oil:gas price ratio has led operators to drill for more oil. The rise in oil rigs can be attributed to the expanding conventional drilling in the Permian basin in Texas and New Mexico as well as to the unconventional drilling in the Western Gulf basin in Texas and the Williston basin in North Dakota and Montana.

According to EIA, vertical drilling (conventional) for oil has quadrupled since June 2009 and horizontal drilling (unconventional) has nearly grown tenfold since May 2009.

EIA reported a oil rig count based on Baker Hughes' data for the Permian basin of more than 400 in July 2011, a sixfold rise from May 2009. Western Gulf basin saw an increase from May 2009 to July 2011 to 162 from 11. Over the same period, Williston basin quadrupled in oil rigs.

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