Posted on 12/15/2014 11:04:18 AM PST by thackney
In the US, the land rig count fell 28 units to stand at 1,820 last week. A decline in vertical oil drilling activity took the rig count lower. Horizontal oil drilling (ie activity in the unconventional oil plays) was only down 7 rigs on the week—about in line with normal seasonal trends this time of year.
Much of this week's activity decline was due to a slowdown in conventional drilling in the Permian Basin. The number of vertical rigs in the Permian fell by 13 to 188. The Permian horizontal rig count was only down 7 to 360.
While the Permian is now best known now for its unconventional liquids plays, there is still a great deal of vertical drilling going on in the area. In some cases, this work is being done with older rigs working for smaller operators who contract the rigs on a spot basis and react quickly to changes in oil prices.
As shown above, the Permian vertical rig count has been falling since mid-2012 as horizontal drilling programs replaced vertical ones. The oil price collapse will now start to accelerate the vertical rig count trajectory lower. Downward pressure on vertical oil drilling activity is likely to continue through year-end and 1Q15, while the horizontal leg down will likely begin in earnest in January when 2015 capital budgets and drilling programs kick in.
The land rig count is still up 117 units from year-ago levels. Those gains are now at risk given the crude oil-sell off as the rise has been driven by horizontal drilling increases in oil plays. We expect the horizontal rig to fall 20-25% from current levels by the end of 1H2015, a prediction we originally made almost a year ago.
A regional summary of rig counts by key basins is below. The Permian remains the most active region with 548 rigs this week (-20) followed by the Eagle Ford with 204 active rigs (-2). The Permian Basin is up 71 rigs year-over-year, leading all basins in growth.
The rig count in Canada stands at 431 units, up 9 rigs this week. The Canadian rig count should begin its normal seasonal decline for the holidays in the next week or two and then rebound for the rest of the winter drilling season.
Predictive value can be found in charting rolling average weekly rig count changes. Normalizing week-to-week noise, this exercise exposes whether up or down rig count trends are intensifying, weakening, or inflecting. Below are three charts we will be watching closely for directional clues in the weeks ahead. These charts are now showing a material loss in momentum and foreshadowing a decline in the rig count next year.
Do you understand that most of the OPEC nations are arguing for a CUT in production because their spending themselves into a hole?
sigh... not enough coffee yet.
I don’t see a war on the cartel.I see various business men acting as entities making judgements about how to make a profit. It is those judgements and the resulting profits that impact others in the business, including those that are members of the cartel.
The activity, the glorious activity, is business, not war
I’ve been unemployed for a long time but have not missed a day I wanted to work in the same time period. Thank the Lord.
Self-employed and owing a business has both compensations and pains but you will know where the bullets come from and you own all the outcomes.
Two people can ruin your life in one day without any reason... your wife and your employer. I’m never giving either of them a shot at me ever again.
I agree with you entirely. No one here sees this as a war on the cartel.
The cartel, however, sees it as a war on us.
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