US rig count falls as best producers cut drilling

OREANDA-NEWS. February 16, 2016. The US drilling rig count continued to decline as a plunge in crude prices to near 13-year lows prompted even best-in-class producers to cut activity.

The total fell by 30 to 541, oilfield services provider Baker Hughes said, the lowest since May 1999, when it fell to 534. Of the total, those drilling for oil fell by 28 to 439 while those looking for gas fell by two to 102.

Overall, the US rig count is down by about 72pc from last year's peak of 1,930.

Pioneer Natural Resources was the latest to reduce activity, cutting down rigs in Texas' prolific Permian basin by 50pc to 12 by the middle of the year. The producer has been an outlier among the US independents, adding rigs in the second part of 2015 even as its peers made dramatic cuts in drilling.

In addition to the Permian cuts, Pioneer will release its six rigs in the Eagle Ford basin in Texas and all four of its rigs in the southern Wolfcamp area, both by the middle of 2016. In the Spraberry/Wolfcamp area, it plans to cut the count to 12 by the first quarter from 14 at the end of 2015. The announcement marks a turnaround from January where it ruled out making sharp cuts to drilling activity.

"The primary reason for that change is that the entire strip for 2016 has dropped over \\$10/bl during that time framework," chief executive Scott Sheffield said, which was "much faster than I had thought."

As a result of sharp cuts in drilling activity across the industry, Sheffield said he expects US shale output to decline by as much as 700,000 b/d later in the year, which will help the market stage a recovery.

US land rigs this week fell by 29 to 514, while the inland waters rigs held unchanged at two.

Offshore rigs, all of which were in the US Gulf of Mexico, fell by one to 25.

The total North American count fell by 50 to 763. The Canadian count decreased by 20 to 222.

The number of US rigs drilling horizontally fell by 25 to 433, while the tally of those drilling vertically fell by one to 59.

By state, Texas lost the most at 14, followed by Oklahoma and New Mexico which lost four each.