Baker Hughes: Overall US rig count unchanged, but oil rigs up 2

The overall US rig count failed to record an increase this week for the second time in 3 weeks as oil-directed rigs edged up. The drop in activity comes just a few days after the US Energy Information Administration slightly lowered its crude oil production forecast for 2018 given the recent decline in crude prices.

The overall US rig count failed to record an increase this week for the second time in 3 weeks as oil-directed rigs edged up. The drop in activity comes just a few days after the US Energy Information Administration slightly lowered its crude oil production forecast for 2018 given the recent decline in crude prices.

Baker Hughes’ tally of active rigs sat unchanged at 952 during the week ended July 14 after posting a 12-unit gain a week ago (OGJ Online, July 7, 2017). Oil-directed rigs climbed—albeit barely—for the 25th time in the past 26 weeks, rising 2 units to 765.

The overall count remains up 548 units since the bottom of the drilling downturn on May 20-27, 2016, and at its highest point since Apr. 17, 2015. This week marked just the seventh time it hasn’t recorded an increase since the rebound began.

Oil-directed rigs are up 449 units since their low in Baker Hughes data on May 27, 2016, and remain at their highest point since Apr. 2, 2015. Gas-directed rigs during the week dropped by 2 to 187, still up 106 units since Aug. 26, 2016.

While onshore rigs rose by 1 this week, 1 rig stopped drilling in inland waters, bringing that count to 3. Rigs drilling horizontally, which have been a major catalyst for the drilling rebound, also were unchanged at 804, up 490 units since May 20-27, 2016. Rigs drilling directionally lost 3 units to 72.

A reflection of the rising number of active rigs over the past year, the American Petroleum Institute this week reported a 62% year-over-year increase in total US wells drilled and completed during the second quarter. The jump includes an 81% year-over-year increase in oil well completions and a 41% year-over-year increase in gas well completions.

Preliminary estimates by EIA show US crude production continued an upward trend during the week ended July 7, rising 59,000 b/d to 9.4 million b/d, up 912,000 b/d year-over-year. Alaska gained 34,000 b/d while the Lower 48 added 25,000 b/d.

EIA in its July Short-Term Energy Outlook maintains US output this year will average 9.3 million b/d, but the agency reduced its forecast for US crude production in 2018 by 100,000 b/d to 9.9 million b/d, which would still be the highest annual average in US history (OGJ Online, July 12, 2017). The record is 9.6 million b/d in 1970.

Tight oil remains formidable

The top shale-producing regions are seen continuing as primary suppliers of US output growth over the coming year and a half. But continued lower crude prices may halt growth in regions outside the Permian.

EIA forecasts US crude production to reach 10.1 million b/d in December 2018, up 900,000 b/d from the June 2017 level and up 1.4 million b/d since the end of 2016. Increased output from tight rock formations in the Permian, Eagle Ford, and Bakken will account for 1.1 million b/d of the expected growth from the end of 2016 through the end of 2018.

Most of the remaining 300,000 b/d increase is expected to come from the Gulf of Mexico as seven new projects are slated start up by yearend 2018. The US offshore rig count, meanwhile, has been relatively static over the past 2 months.

The Permian is projected to represent 30% of total US oil production in 2018, by yearend producing 2.9 million b/d, up 500,000 b/d from estimated June 2017 levels.

The Eagle Ford in both 2017 and 2018 is expected to produce 1.3 million b/d, up 100,000 b/d since late 2016. The Bakken in 2017-18 is expected to produce 1.1 million b/d, down 100,000 b/d from its 2015 level.

EIA, which forecasts West Texas Intermediate prices to average below $50/bbl until second-half 2018, believes Eagle Ford and Bakken output growth to be limited for most of the next year.

Gulf production is projected to average 1.7 million b/d in 2017 and 1.9 million b/d in 2018. Contributions to the increases are expected in 2017 from the expansion of Chevron Corp.’s Tahiti field and the start of production from Anadarko Petroleum Corp.’s Horn Mountain Deep field, and in 2018 from the start-ups of Chevron’s Big Foot and Hess Corp.’s Stampede projects.

Permian drilling up, Eagle Ford down

Rig count increases in Texas have slowed over the past two months, but the state managed to lead the major oil- and gas-producing states this week with a 3-unit gain to 466. The total is up 239 units since May 20-27, 2016.

The Permian jumped 4 units to 373, up 239 units since May 13, 2016. The Eagle Ford dropped 4 units to 80, still up 49 units since Oct. 14, 2016.

Utah rose 2 units to 9. North Dakota and Colorado each edged up 1 unit to 53 and 37, respectively. North Dakota is up 31 units since May 27-June 3, 2016, while Colorado is up 20 units since Oct. 28, 2016.

The DJ-Niobrara gained 2 units to 29. Reflecting the activity of its home state, the Williston, home of the Bakken, also was up 1 unit to 53.

Oklahoma, one of the hottest states for new drilling this year, as well as Louisiana and Alaska each fell 2 units to 134, 67, and 6, respectively. The Woodford, which has mostly supplied the recent Oklahoma surge, declined 4 units to 59.

Canada’s rig count resumed growth this week with a 16-unit climb to 191, up 111 units since May 12. All but one of the rigs to come online target gas, bringing that tally to 85. Oil-directed rigs now total 106.

Contact Matt Zborowski at matthewz@ogjonline.com.

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