20th February 2015
The Baker Hughes U.S. onshore rig count continued its fall this week, although the decline of 50 is around half the level of the prior three weeks. The rig count has now declined by 620 (33%) from a November 2014 high of 1,876, to 1,256 on 20 February 2015. The key question is whether this represents a slowing of the trend, or is simply an artifact of reporting.
- 13 Feb 2015 - Rig Count Fall Accelerates Past 2009 Levels
- 6 Feb 2015 - Rig Index Continues Sharp Drop Despite A Rising Oil Price
- 30 Jan 2015 - Rig Index Drops Sharply Once More, Causing Late-Day Rally In Oil Price
Brent price held relatively flat throughout the week oscillating around the US$60/Bbl mark, keeping the gap with WTI at around US$ 8-10/Bbl which was trading in the US$50-52/Bbl range. The widening of the Brent-WTI spread from the start of the year reflects the increase in storage at Cushing with EIA data reporting this as “the highest level for this time of year in at least the last 80 years”.
The standout data point for the week is in the Permian Basin, with only 6 rigs being laid down versus 49 in the prior week. However, with declines in other key basins remaining similar to the recent past, the Permian Basin may just reflect reporting timing; it will be interesting to see the next week or two to confirm trends.
What may now be valuable to watch more closely is the nature of activity being undertaken, with a number of operators now appearing to adopt a ‘drill and delay’ completion strategy. If this becomes a significant trend then a disconnect may start to be seen between activity and production – a short term slow or decline followed by an acceleration later in the year or early 2016 (See 13th February Post and Oil Price Crash to Have 2 Million Barrels per Day Impact in US?)
In the Gulf of Mexico, both the rig count and the oil rig count increased by 2, exemplifying the different reaction of this play to the onshore (See Pain Likely in 2015, But Deep Water GOM Should Be Better Placed Than Unconventional)
Rig Count and Oil Price Indices
In order to provide a relative comparison, the GCA Indices for rig count and oil price compare today’s data with the average in the three month period April to June 2014. Changes this past week place the GCA Index for U.S. onshore rigs at 70, 34 points down on the 2014 high and 3 points down on the previous week moving even closer to the trend established in 2008-2009. The Brent oil Index closed down 1.
Permian, Eagle Ford and Bakken
Looking more specifically at the major onshore basins where unconventional (tight and shale) oil are being developed (Permian, Eagle Ford and Williston Basin), which together represent 60% of the oil-targeted activity, the drop continues to slightly exceed the overall onshore rig count change, being between to 35 and 42 points off 2014 highs, compared to 38 overall.
The rig count in these basins is down 15 in the week, with the GCA Indices now ranging from 67 (Permian and Williston) to 68 (Eagle Ford). The GCA Index for all three basins combined is 67, a drop of 2 points in the week.
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