Rig Count Decline Picks Up Pace Over Prior Two Weeks

6th March 2015

Rig Count and Oil Price

The Baker Hughes U.S. onshore rig count continued its decline this week, falling by 75 compared to drops of 42 and 48 for the prior two weeks. The rig count has now declined by 735 (39%) from a November 2014 high of 1,876, to 1,141 on 6 March 2015. This reduction reverses the “slowdown” trend observed from the past two weeks, suggesting that there is still ample room for further falls as operators continue to slash 2015 CAPEX budgets.

Previous Weeks

Brent price continues to hover around the US$60/Bbl mark, with WTI closing the differential slightly to around US$10/Bbl and closing the week out at around US$50/Bbl.

Rig count reductions for the week picked up in the Permian Basin, with 23 oil rigs being laid down versus 7 in the prior week and 6 the week before that. Eagle Ford rigs were down 7, compared to 5 and 4 in the prior two weeks. The drop in the Williston Basin (Bakken) slowed to 3 from 11 in the prior week although, as suggested for some prior week figures, this may just be “reporting noise”.

Oil rig count dropped by 2 in the Gulf of Mexico, while the total number of rigs in the region remained unchanged.

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 64, 40 points down on the 2014 high and 4 points down on the previous week. This is still right on the 2008-2009 trend, as rig decline resumed speed. Both the Brent and WTI Oil Index stayed flat for the week.

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 41 to 49 points off 2014 highs, compared to 40 overall.

The rig count in these basins is down 33 in the week, with the GCA Indices now ranging from 60 (Williston) to 62 (Eagle Ford). Permian lost 23 oil rigs or an equivalent of 4 basin index points, suffering the largest decline this week. The GCA Index for all three basins combined is 61, a drop of 4 points in the week.