Active Rig Count - April 22

[dan_s]

The North American active drilling rig count continues to fall. Each week it sets a new record low. We are now at the lowest number of rigs drilling for oil in the United States in the 70+ years that Baker Hughes has been publishing their weekly report on rig activity.

The sharp drop in drilling activity in the first quarter will show up as a sharp drop in production in the 3rd quarter.

United States
> Rigs drilling for oil is down 8 to 343, compared to 1,609 in October, 2014 and 703 a year ago
> Rigs drilling for gas is down 1 to 88, compared to 225 a year ago.

These numbers are incredible to me. We probably need 1,000 rigs drilling for oil and 500 rigs drilling for gas to hold U.S. production flat. The EIA's Drilling Productivity Report predicts that onshore oil production will fall by 114,000 barrels per day from April to May. They expect natural gas production to fall by half a Bcf per day each month. You can bet that the rate of decline will accelerate in Q3. I now predict that U.S. production will fall be 8.0 million barrels per day by 12/31/2016. If oil goes to $100/bbl on 1/1/2017 it will take over a year to reverse falling production. This industry is like a big tanker, not a speed boat.

Canada is close to shut down. Active rig count at 40. Unbelievable! If you want to retire in Calgary, now is a good time to buy a home up there.