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Texas Accounts For Majority of Latest Rig Drop

During a week in which only eight land-based U.S. drilling rigs left play, Texas and the Permian Basin saw the majority of departures, losing seven and five rigs each, respectively.

After the Permian Basin, the next biggest loser was the Eagle Ford Shale, which gave up two rigs. The roster of remaining plays and states had a column of mostly zeros beside it, with any losses limited to one per play/state.

More rigs were lost in the latest count by Baker Hughes Inc. (BHI) than in the previous tally, dated April 15, but declines have moderated in recent weeks. "...[T]here seemingly isn't much more to lose..." Wunderlich Securities Inc. analyst Jason Wangler said in a recent note.

Cowen and Company analysts have been modeling a trough in the BHI U.S. land rig count of 375-400 units. And the April 22 BHI count is about there.

Friday saw 401 land rigs still running out of a total U.S. count of 431 rigs. A net of nine U.S. rigs were lost during the week. Eight oil rigs left U.S. play, joined by one natural gas rig. The directional, horizontal and vertical categories each lost three units.

There was no net change in Canada where 40 rigs remained running at the end of the week.

The number of active onshore drilling rigs in the Lower 48 states fell 78% (from 1,876 to 412) from Oct. 31, 2014 to April 15, 2016, according to BHI data cited by the U.S. Energy Information Administration (EIA) in a recent note. The decline in active rigs and well completions is projected to result in month-over-month onshore oil production declines of 120,000 b/d through September 2016, EIA said.

According to EIA, crude oil production in the Lower 48 states is expected to decline from an average of 7.41 million b/d in 2015 to 6.46 million b/d in 2016 and to 5.76 million b/d in 2017. Increased production from the federal Gulf of Mexico is not enough to offset those declines, with total projected U.S. production falling from 9.43 million b/d in 2015 to 8.04 million b/d in 2017.

EIA said the number of operating rigs in the Lower 48 states is expected continue to decrease through mid-2016 before beginning to slowly increase. However, expected Lower 48 production will continue to decline -- although at a slowing rate -- throughout 2017.

Meanwhile in Texas during February, production as reported to the Railroad Commission of Texas (RRC) was 70.25 million bbl of crude oil and 580.78 Bcf of total natural gas from oil and gas wells. These are preliminary figures based on production volumes reported by operators and will be updated as late and corrected production reports are received.

Production reported to the RRC for the same time period last year was: 65.57 million of crude oil on a preliminary basis, updated to a current figure of 83.40 million bbl; and 563.84 Bcf of total gas on a preliminary basis, updated to a current figure of 672.05 Bcf.

In the last 12 months, Texas reported production was 1.023 billion bbl of crude oil and 8.4 Tcf of total gas. Crude oil production is limited to oil produced from oil leases and does not include condensate, which is reported separately.

Texas February production came from 184,117 oil wells and 89,379 natural gas wells.

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