The US oil rig count slipped another eight rigs this week to 392, Baker Hughes said Friday, amid a rally in crude not seen since the first few days of January.
Oil rigs are down 57% from 922 during the same week in 2015, Baker Hughes said in its weekly rig count, to a level not seen since the last downturn in 2009. In addition, the horizontal rig count -- an indicator of shale drilling--weighed in at 389, also down 57% from 895 during the same week a year ago.
Crude oil, which has hovered around the $30/b mark most of this year with forays below that price, climbed into the mid-$30s this week as analysts continued to watch the rig count as an indicator of potential falling production this year.
"Our revised rig count forecast reflects the incremental weakness and model another 15 land rigs falling per week for the remainder of the first quarter," Evercore ISI analyst James West said in an investor note this week.
"That equates to [a first-quarter average of] about 525 rigs and exiting the quarter at just around 425 working land rigs," West said.
This week, 465 land rigs were working in the US, Baker Hughes data showed.
But all rigs are not equal in a falling rig count environment, and the later ones to come off carry more weight, Dave Pursell, managing director of investment bank Tudor Pickering Holt or TPH, said at Platts' North American Crude Summit Thursday.
Pursell said the first 100-200 rigs that were idled in early 2015 did not impact supply at all because they were drilling marginal fields. These included the non-core Bakken Shale in North Dakota and Montana and the complex Tuscaloosa Marine Shale in Louisiana and Mississippi, where the industry was just starting to figure out the geology when oil prices fell in late 2014.
But now that the oil rig count has been pared down from 1,609 in late 2014, "every tranche of 150-200 rigs start to have a bigger and bigger production impact," Pursell said.
This week, the Williston Basin in North Dakota and Montana, which contains the giant Bakken Shale, was down to just 33 oil rigs, down by three from the previous week and down from 108 in the same week last year. The recent peak was 198 in October 2014.
And the Permian Basin, of West Texas and North Dakota, stood at 156 oil rigs, down six from last week, and down from 328 during the same week in 2015. In late 2014, 562 oil rigs were working in the Permian, the US' most prolific and active basin.
The Eagle Ford dropped just one oil rig this week to 40, down one from the prior week but down from 129 in the same week in 2015. By contrast, 206 oil rigs were active in the Eagle ford in October 2014.
Pursell, looking ahead, said that while shale oil production in the Permian is projected to grow this year -- TPH estimates 1.96 million b/d against 1.90 million b/d in 2015 -- Eagle Ford output is going the other way.
The South Texas basin should see 1.33 million b/d, down from 1.56 million b/d in 2015, Pursell said.
Both basins will grow, with the Permian topping 2.5 million b/d by 2020, although the Eagle Ford may drop as low as 1.2 million b/d next year before resuming growth in 2018 and reaching 2.25 million b/d in 2020, according to TPH estimates.
"We think Bakken, Eagle Ford and Permian grow within cash flow or [keep] flat production at $55/b," Pursell said. "You probably don't get as much price inflation because you're not rushing out to do all this stuff. This is a big deal."
