US rig count drop slows in 5 out of past 6 weeks

OREANDA-NEWS. June 11, 2015. The fall in US rig count slowed for five out of the past six weeks as a recovery in oil prices and a drops in the costs of services prompted producers to add drilling rigs in areas such as the Permian basin and the Barnett shale.

The rig count fell by seven to 868 this week, according to data from oilfield services company Baker Hughes, reversing an acceleration last week that saw a decline by 10. Prior to that, the pace of declines had slowed for four straight weeks.

The count is just above the 12-year low, the 862 mark set on 24 January 2003. It surpassed the lowest level of the previous market crash of 2008-09, when it dropped to 876 on 12 June 2009.

That steep fall is prompting service providers to offer deep discounts as they seek to retain their share in the shrinking market. US exploration and production companies will see efficiency gains of 25-30pc on their onshore upstream capital investment in 2015 from a year earlier, according to a study by consultancy IHS. The gain is even steeper, at 60pc, when compared to the expected savings in the fourth quarter of this year versus a year earlier.

Falling costs and the producers' focus on the most productive wells is poised to setup US oil output for a rebound in 2016, IHS said. The two factors will "substantially mitigate the damage to the balance sheets brought on by the 2014 oil price decline," it said. The industry will start to "drill the prime picks from the inventory of 2,500 to 3,000 drilled but uncompleted wells."

The Permian and the Barnett shale, also in Texas, added one rig each, while the Eagle Ford, another key basin in the state, lost seven. One rig was added each to the Ardmore Woodford in South Central Oklahoma, the Granite Wash, which runs across the southwest Anadarko Basin in the panhandles of Texas and Oklahoma, and the Marcellus in the Appalachian region.

This week's rig count fall marked the 26th straight week of drops, far exceeding the earlier losing streak of 19 weeks that started in November 2008. The count is now down 55pc from last year's peak of 1,931 and 53pc lower than end-2014 levels.

The number of rigs drilling for oil fell by four this week to 642, while the number drilling for natural gas decreased by three to 222 and miscellaneous rigs were unchanged at four.

The number of rigs drilling on land fell by seven to 837, while those drilling offshore fell by two to 27.

Rigs drilling in the US Gulf of Mexico fell by two to 27. The total North American count increased by 11 to 984. The count in Canada rose by 18 to 116.

Rigs drilling vertically fell by 12 to 99, while those drilling horizontally — a method typically used to unlock hydrocarbons in shale formations — fell by one to 673.