BHI: US rig count down for 7th-straight week, falls below 800

Oct. 9, 2015
The US drilling rig count dropped 14 units during the week ended Oct. 9 to 795, remaining at its lowest level since May 3, 2002, according to data from Baker Hughes Inc.

The US drilling rig count dropped 14 units during the week ended Oct. 9 to 795, remaining at its lowest level since May 3, 2002, according to data from Baker Hughes Inc. (OGJ Online, Oct. 2, 2015).

The count has now fallen in 7 consecutive weeks, during which time it has lost 90 units. Compared with the total reported this week a year ago—when the count was 1 unit below its peak of 1,931 reached that September—1,135 units have gone offline.

BHI also reported this week that the average US rig count for September was 848, down 35 from August and down 1,082 from September 2014.

US oil rig slide continues

During the week, oil-directed rigs dropped 9 units to 605, down 1,004 year-over-year when that count reached its peak of 1,609. The oil-directed count has fallen in 6 consecutive week, giving up 70 units during that time.

Gas-directed rigs increased their share of the weekly decline, losing 6 units to settle at a total of 189, down 131 year-over-year. One rig considered unclassified remains in operation.

Land-based rigs decreased 16 units to 760, down 1,099 year-over-year. In their 7th straight week of declines, rigs engaged in horizontal drilling fell 11 units to 598, down 755 year-over-year and 774 since their peak of 1,372 touched on Nov. 21, 2014. Directional drilling rigs were unchanged at 83.

The Gulf of Mexico picked up 2 rigs this week to reach 31. That boosted the overall US offshore count by the same margin to 32. Rigs drilling in inland waters were unchanged at 3.

Oklahoma led the major oil- and gas-producing states in losses for the 2nd consecutive week, relinquishing 6 units to 91, down 120 year-over-year and now the state’s lowest level since Dec. 4, 2009.

Texas lost 4 units to 353, now its lowest total since July 31, 2009. The state’s drop was anchored by a 10-unit decline in the Permian to 235, down 327 year-over-year; and a 2-unit decline in the Eagle Ford to 80, down 131 year-over-year.

Louisiana, North Dakota, Pennsylvania, Ohio, and Kansas each edged down 1 unit to respective totals of 65, 64, 29, 19, and 9. The Haynesville dropped 2 units to 24.

Colorado was the only state to report a gain, edging up a unit to 31. It reflects a 1-unit rise in the DJ-Niobrara to 27.

Changes in count outside US

Canada’s rig count, meanwhile, increased for a 2nd consecutive week, edging up 1 unit to 180. Oil-directed rigs gained 4 units for the second straight week, reaching a total of 74. Gas-directed rigs lost 3 units to 106. Since this week a year ago, the overall Canadian count has fallen 240 units.

The average Canadian rig count for September was 183, down 23 from August and down 223 from September 2014.

The worldwide rig count for the month was 2,171, down 55 from August and down 1,488 year-over-year. Outside of North America, only the Asia-Pacific region lost units, down 2.

The Middle East added 3 units, with Saudi Arabia up 5, Pakistan up 4, UEA-Abu Dhabi up 2, and Iraq up 1. Latin America added 2, with Bolivia up 4, Venezuela up 3, Argentina and Trinidad and Tobago each up 2, and Brazil up 1.

More pain for contractors

Cyprus-based international offshore drilling contractor Ocean Rig UDW Inc. reported this week that it may cold stack 1 unit and scrap another.

The Ocean Rig Olympia deepwater drillship started its new contract in Angola on Aug. 15, and is expected to move to the Ivory Coast for one well in the fourth quarter before returning to Angola to complete its remaining contract until June 2016. The company says there are no prospects for additional work at the moment. If nothing is found, the rig will be cold stacked and the respective SPS will be postponed.

The Eirik Raude deepwater semisubmersible drilling rig is completing its third well in a 6-well program in the Falklands, where it’s expected to remain into January 2016. It too lacks future work prospects. If nothing is found, the rig will be cold stacked and Ocean Rig may scrap the unit, the company says.

“The market continues to remain challenging due to the massive spending cuts initiated by the oil companies,” explained George Economou, Ocean Rig chairman and chief executive officer. “For rigs that we cannot secure long-term employment that are coming up for their 5-year SPS, we will cold stack the units, and in the case of the semisubmersible rigs seriously consider all our options including disposal or scrapping.”

Patterson-UTI Energy Inc., a Houston-based onshore drilling contractor, reported it had an average of 99 drilling rigs working in the US and 4 in Canada during September. For the 3 months ended Sept. 30, the company had an average of 105 drilling rigs operating in the US and 4 rigs in Canada.

While the Canada total was flat compared with August, the US total was down 7 units in September month-over-month. Compared with September 2014 totals, the company’s US fleet was down 112 units last month and the Canada fleet was down 6 units.

New US nadir projected

In its oil field services outlook for 2016 released this week, financial services firm Raymond James & Associates Inc. further revised down its rig count projections, the last of which was published during the light summer rebound and painted a slightly rosier picture for the near-term (OGJ Online, Aug. 28, 2015).

“Our latest forecast implies a 29% reduction in [exploration and production] drilling and completion spending in the US for 2016,” RJA explained. “In turn, we now expect the US rig count to be down another 28% on average [year-over-year] in 2016, compared to our previous forecast of a 9% [year-over-year] rig count decline. Our latest outlook for drilling activity in the US forecasts a renewed acceleration in the rig count decline, leading to a bottom in mid-2016 of 595 rigs.”

The count hasn’t been below 600 since the week ended July 16, 1999, when the market was rebounding from the downturn of late-1998. On that same day, the Brent spot price was $19.42/bbl.

RJA believes the steeper decline will result in “a much sharper recovery in oil field activity for the back half of 2016 through 2017,” with the 2017 average count leaping 74% year-over-year.

Meanwhile, the firm’s outlook for offshore and international activity remains unchanged. It expects “to see persistent deterioration through 2017, as cancellations of longer lead time projects and US market share gains hamper growth.”

Fewer US rigs, less oil

US crude oil production is still expected to increase from 8.7 million b/d in 2014 to 9.2 million b/d in 2015, according to this month’s Short-Term Energy Outlook from the US Energy Information Administration (OGJ Online, Oct. 6, 2015). However, its forecast of 8.9 million b/d for 2016 is slightly higher than last month’s projection.

The forecast continues to reflect an oil-price outlook that will weigh on oil-directed rig counts and drilling and well completion activities throughout the forecast period.

EIA expects US production declines generally to continue through August 2016, when total production is projected to average 8.7 million b/d.

Goldman Sachs analysts said this week that they expect US oil production will fall 225,000 b/d in 2016 vs. 2015 levels (OGJ Online, Oct. 6, 2015).

Contact Matt Zborowski at [email protected].