Innovations Reduce Effectiveness of Rig Counts as Industry Barometer, but Numbers Still Climbing
Since 1944, Baker Hughes, the oilfield services company based in Houston, TX, has produced a weekly report of rig counts for the United States and Canada, adding international sites in 1975. In their report for the month of May, 2014, the total oil rig count for the U.S. has risen by six, bringing the total from 1,528 to 1,536. In the first five months of the year, oil rig counts have seen an increase of 158, which is about 11 percent.
Shale plays in Texas have been a major contributor to the rise in oil rigs, with the Permian Basin leading these. The drop in oil prices since the high of $110 per barrel last September has not been significant enough to affect drilling. The current level of around $90 per barrel is supportive of an increase in drilling and a high rig count, demonstrating the confidence oil and gas producers have toward growth in the industry.
Permian Basin Rig Counts
As one of the major players in the boost for oil and gas production, the Permian Basin generally has seen a solid increase over the past five years. Baker Hughes reported a minor drop in oil and natural gas rigs in this region this past week to from 550 to 548. The rig counts at this time last year were significantly lower at 401.
Eagle Ford Rig Counts
The Eagle Ford shale play saw an increase in rigs by one, according to Baker Hughes. The region currently has 214 rigs, which is down from 231 in June of 2013.
Barnett Shale Rig Counts
Oil and natural gas rigs increased by two this week in the Barnett shale play, bringing the total to 28. This number is about the same, down from just 30 rigs in the play at this time in 2013.
The development of hydraulic fracturing and horizontal drilling techniques and the natural energy resources available through these methods in shale plays such as the Permian Basin and Eagle Ford have been instrumental in bringing exploration and production back from its low in 2009.
The largest decreases in rig counts in the United States in the most recent reports were due to the closure of 14 vertical rigs. This may be due to the current trend of larger investments in horizontal drilling, and the decrease in the effectiveness and financial returns of traditional methods.
While rig counts do offer a general indication of production levels, experts expect a gradual decline in rig counts with an increase in production as drilling processes become more efficient and new techniques are developed. The cost of one well has dropped by several hundred thousand dollars in many cases due to the ability to use “walking rigs” to complete several wells with a single rig. Even though this appears to negatively affect the results of the count, production still climbs.
The rig count may no longer provide the best indicator of production, but the tracking of rigs still provides important information, such as employment statistics and product demand, and is still important in the industry. As innovation changes the way oil and gas companies increase output and production, new indicators and analyses will need to be developed in order to accurately reflect the progress of the industry.