In the unconventional gas resource era, falling rig counts no longer mean declining production, and the traditional rig count no longer tells the tale of where the industry and the market are going, according to Bentek Energy LLC.

“It takes far fewer rigs in today’s environment to accomplish what the historical rig count used to do,” said Bentek’s Tom Sherman, a senior energy analyst. “With the efficiency gains per rig that we are seeing in today’s rig fleet, production can remain flat or even increase with a rig count that is 50% less than what it was last year.”

Bentek has developed what it’s calling the Bentek Productivity Index (BPI), which uses the Jan. 1, 2005 rig count as a benchmark and then factors in efficiency and productivity gains seen in the gas patch to develop an indicator that it says is more representative of the production outlook than the traditional rig count.

In support of the need for a new index, Bentek cites productivity gains seen in the Barnett Shale play of North Texas. Barnett wells drilled in 2008 were three times more productive than the average U.S. land gas well in 2006, according to Alan Orr, executive vice president of engineering and development at Helmerich & Payne International Drilling Co. Haynesville Shale wells being drilled in North Louisiana and East Texas are 10 times more productive than the average 2006 well, he said.

“Perhaps more importantly, the volume of natural gas production per well is dramatically higher today compared to levels seen only two years ago,” Bentek said in a Market Alert released last Wednesday. “Today, initial production rates have climbed to an average of 2.2 MMcf/d in the Green River/Overthrust compared to about 1.5 MMcf/d two years ago.”

As of Oct. 16 Bentek’s BPI was 2,764, which was 1,408 rigs higher than the actual rig count of 1,356 active oil and gas rigs as measured by RigData. “The BPI shows that the ‘effective’ rig count is much higher than the actual rig count because the rigs that are still operating are far more productive than the rigs that were operating in the past,” Bentek said.

Bentek chose to base its index on the RigData rig count instead of the popular Baker Hughes rig count for a number of reasons, explained Bentek Managing Director Rusty Braziel.

“One of the reasons why the rig count from RigData is higher than Baker Hughes is that RigData includes basically all rigs, where Baker Hughes has a cutoff point on size. The smaller rigs don’t get counted in Baker Hughes,” he said. “That’s a particular issue in some basins, like for instance the Marcellus where there’s a lot of smaller rigs running around just because of the logistics of that part of the country.

“One of the reasons our [BPI] number is larger than the Baker Hughes number is we’re starting with the RigData number in the first place. The second is because we’re including both oil and gas rigs. A lot of folks when they’re looking at the gas industry don’t do that. Of course, about 20% of the oil rigs that are drilling have associated gas with them. It’s always difficult to tell when there’s associated gas and when there’s not and so we took the most inclusive approach that we could and included both oil and gas rigs into the total.”

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.