46% fewer US wells drilled year-to-year in second quarter, API says

US oil and gas drilling fell to levels not seen since 2003-04 for a second consecutive quarter during the three months ending June 30, the American Petroleum Institute said. An estimated 8,038 oil wells, gas wells and dry holes were drilled, 46% fewer than in 2008’s second quarter, it said in its latest quarterly well completion report.

“The US drilling decline that began last quarter in connection with the current downturn in economic activity has continued in earnest in the second quarter of 2009 as companies proceed with caution in an uncertain year,” said Hazem Arafa, director of API’s statistics, on July 13.

API said that the number of exploratory US wells drilled this quarter plunged 63% year-to-year to 336, while the number of development wells slipped 46% to 6,761.

While gas continued to be the primary domestic drilling target, with an estimated 4,225 wells completed during 2009’s second quarter, activity was 43% year-to-year in the most severe quarterly decline this decade, it indicated.

Oil well completion activity continued to subside, with estimated totals falling 53% year-to-year to 2,872, according to API. It said that total estimated footage drilled declined 53% year-to-year to 48.1 million feet.

The report did not surprise Mark S. Urness, managing director and head of energy securities at Calyon Securities (USA) Inc. in New York. “The US rig count was down about 50% year-over-year and about 29% sequentially in the second quarter, obviously driven by a dramatic reduction in gas drilling,” he told OGJ Washington Pulse on July 13.

He said that the number of US rigs making hold fell about 57% from its peak in late August to what may have been a bottom in mid-June before rebounding by about 30 rigs since. It appears to be entirely oil related, rather than natural gas. With oil prices to over $70/bbl and now down around $60, mom-and-pop operators have begun to drill more aggressively for oil in places like the Permian Basin,” Urness said.

The year-to-year drops in both exploration and development drilling are consistent with lower prices, he continued. “Typically, when prices are low, exploration is deferred. The uptick in oil prices helped development drilling, but gas prices are still low and activity there is slow nearly everywhere except in the Haynesville Shale,” he said.

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