Active Rig Count - Nov. 6

[dan_s]

The active rig count for North America continues to fall and I am expecting it to keep falling into early 2016. Most companies have exhausted their 2015 capital budgets and they are focused on living within cash flow until oil prices improve. Most of the companies I follow are saying they intend to drop more rigs by year-end.

North America active rig count dropped 10 more rigs last week and now stands at 956, compared to 2,335 a year ago.

U.S. Breakdown:
> Rigs drilling for oil dropped 6 to 572, compared to 1,568 a year ago.
> Rigs drilling for gas increased 2 to 199, compared to 356 a year ago.

The United States needs at least 1,000 rigs drilling for oil to keep production flat. U.S. oil production peaked at over 9.6 million barrels per day in April, 2015. Current production is around 9.0 million barrels per day. My SWAG is that U.S. crude oil production will fall by more than 1.2 million barrels per day in the twelve months ending March 31, 2016. We are already importing more oil than we produce. One reason the U.S. crude oil storage level is going up is because the refiners are taking more imported oil because they see a shortage of domestic oil ahead.

U.S. natural gas production is also on decline. See current presentation on the Range Resources (RRC) website.

The EIA continues to overstate current production. They recently "adjusted" their production data for August by -160,000 BOPD because state reports showed much lower production than they had previously reported. All EIA weekly production and storage numbers are based on flawed formulas that give too much weight to historical trends.