The Baker Hughes Inc. (BHI) U.S. land rig count gained again during the week ending June 10, and with increasing confidence, analysts following the drilling and services sector have been calling a bottom to the long-running activity decline.
The U.S. land rig count gained six units, bringing the active total to 388. There was no change in the inland waters or offshore. Three of the returning rigs were gas-directed and three were oil units. Four horizontal rigs returned, accompanied by one directional and one vertical.
"The rally in natural gas over the last month is likely to push the gas rig count higher sooner than we initially envisioned as operators may be encouraged to add incremental activity given the strength in the front end of the curve combined with a rising 2017 strip ($3.12/Mcf up about 30 cents from two months ago)," analysts at Tudor, Pickering, Holt & Co. said in a note Friday. "We currently model drilling activity to remain depressed until 2017 but a rapid rise in the front end of the curve and, more importantly, a hedge-able strip above $3/Mcf could bring back rigs in Q3 2016 (supply response in early 2017).
"Expect unconstrained basins like the Haynesville, which are now approaching breakeven economics between $2.00-2.50/Mcf with new completion techniques, to be the first areas the market looks to add back capital."
Indeed, the Haynesville gained two units in the latest count, resting at 17 active rigs at week's end.
The rig count stabilization seen over the last few weeks has staying power, according to analysts at Cowen and Company. "While there is likely some seasonality supporting these increases, barring another commodity price collapse, we do believe the bottom is in for the rig count," Cowen said in a note published Wednesday. "We expect rig counts to remain choppy for the remainder of the summer, with potential increases later in 3Q to early 4Q."
Two rigs returned to activity in the Lone Star state, bringing the tally of active rigs there to 178.
On Wednesday the Railroad Commission of Texas (RRC) said that it issued 606 original drilling permits in May compared to 916 in May 2015. The May total included 488 permits to drill new oil or gas wells, 13 to re-enter plugged wellbores and 105 for recompletions of existing well bores. The breakdown of well types for those permits issued included 179 oil, 28 gas, 354 oil or gas, 17 injection, zero service and 28 other permits. In May, RRC staff processed 760 oil, 199 gas, 60 injection and 11 other completions compared to 1,299 oil, 201 gas, 72 injection and seven other completions in May 2015. Total well completions for 2016 year to date are 5,529, down from 9,832 recorded during the same period in 2015.
In Canada, 16 oil rigs returned to play along with eight gas rigs, bringing Canada's tally of active rigs to 65. Combined with the U.S. total of active rigs -- 414 -- that made for a North America total of 479.