Active Rig Count - March 24

[dan_s]

Baker Hughes issued their weekly active rig count report a day early this week because of the Good Friday holiday.

The North American active rig count dropped another 26 rigs last week. This is the 14th weekly decline in a row and most have been BIG drops.

United States:
> Rigs drilling for oil declined 15 to 372, down from 813 a year ago. The number of rigs drilling for oil peaked in October, 2014 at 1,609.
> Rigs drilling for gas increased 3 to 92, down from 233 a year ago.
> Gulf of Mexico up 1 to 27, down from 33 a year ago.

Canada is heading to a total shut down as the rig count dropped 14 to 55, down from 120 a year ago. Canada's normal rig count is 300-400 this time of year.

Baker Hughes has been reporting the active rig count for over 70 years and this is the lowest count EVER.

I expect the active rig count to continue to fall through Q2.

[mikelp]

The new Canadian government is pleased with the collapsing rig counts, they are sure they won't need drilling rigs or natgas for power generation or industry much longer. The oil & gas industry is so smelly & dirty, all that noise and filth, such sweaty pursuits are hardly worthy of a progressive left-wing gentleman.

Trudeau will be announcing a bold new clean power program. He's planning to provide all Canadian citizens with little pinwheel hats that generate wind power...all citizens will be required to stand outside in the breeze for a few hours per day while plugged into the grid, hence "doing their fair share".

The clean power pinwheel hat program announced by the Trudeau government is being called: "CLEAN POWER TO THE PEOPLE"

[prince_jake_33]

you are kidding aren't you

[gjames]

Sounds like a great thing for Bernie Sanders supporters to busy themselves with!

[bobs]

Dan
I looked at the BH US oil rig chart (it stops at the end of 2015) and at the end of 2008 the high was a little over 400 and then dropped in mid 2009 for a short period to just above 200 before making the big climb and then dropping now down to a little under 400.
Since US oil production hasn't slowed that much and the rigs are presumably more efficient now we still seem to have way too many US rigs drilling for oil. What am I missing?

[dan_s]

The drilling of wells is not what increases production, it is the completion of wells. The onshore rigs drilling for oil peaked in October, 2014 and onshore oil production peaked in April, 2015. Onshore oil production has been on steady decline ever since. Increasing production from the Gulf of Mexico offset the declining onshore production for much of 2015.

Onshore oil production is now falling by ~100,000 bbls per day each month. Gulf of Mexico oil production is expected to increase 150,000 to 200,000 BOPD this year because of well tie ins to some big production platforms. From 1-1-2016 to 12-31-2016 I estimate that U.S. oil production will fall 800,000 to 1,000,000 bbls per day.

Yes, the rigs that are still drilling onshore wells are drilling in the "cream" of the Tier One leasehold and they are more efficient, but they are not twice as good as they were two years ago. We've seen a sharp drop in the active rig count during the first quarter. It takes 3-6 months before we seen the production response. It is definitely coming.

Just FYI if all drilling stopped in the United States, production would drop 2.0 to 2.5 million bbls per day in one year. It takes a lot more rigs drilling today than we have running to hold U.S. production flat. More than half of all U.S. oil production now comes from wells drill after 2013. Most of it from horizontal wells with steep decline rates.

Go to this link: http://www.eia.gov/petroleum/weekly/cru ... cks-supply
Scroll down to the 4th chart for "Crude Oil Production and Imports". Notice that the blue line shows the 4 week average of production for 2015-2016. Notice that it has started to drift down. I think that blue line will continue to go down all year and the angle of decline will accelerate.