Drillers took heed of recent industry comment that the U.S. rig count has further to fall. The latest Baker Hughes Inc. count shows the withdrawal of 17 land-based rigs and one offshore rig from service (12 oil and six natural gas).
Operators couldn't get out of the Permian Basin fast enough in the latest count. Seventeen rigs left the Permian, contributing to a Texas statewide decline of 13, making the Permian and Texas the biggest losers among plays and states. Recovery for Texas, and the industry, will be a long time coming, an economist following the industry told a Houston audience recently (see Daily GPI, Jan. 26).
Across the remainder of major plays, declines were more modest. New Mexico was the second-biggest loser among states, giving up four rigs, followed by Louisiana, which lost three.
The overall U.S. count stood at 619 on Friday, down from 1,543 one year ago. The U.S. oil rig count stood at 498, and there were still 121 gas-directed rigs running. The vast majority (487) of the rigs still running are horizontals; however, that category lost 13 units in the latest count.
Expect rigs to keep falling, analysts at Cowen and Company said in a recent note after looking at exploration and production company capital spending plans for this year.
Any expectation of a price recovery (and a return to increased drilling) is threatened by the work that has already been done in the oil/gas patch, BTU Analytics said in a note. Drilled but uncompleted (DUC) wells will be around weighing on prices longer than most would like. "Until the number of DUCs returns to levels more aligned with historical working inventory levels (three to six months of drilling), we expect their threat to loom large over the market and have a dampening effect on any near-term price recovery," the firm said.
Canada saw the withdrawal of 19 rigs from service, making for a North America decline of 37 rigs in the latest count, which rested at 1,937 as of Friday. Before the most recent count, rigs had been returning to service in Canada following the winter holidays.