Texas lost 12 rigs and the Permian Basin saw seven depart, making them the biggest losers among states and plays in the most recent rig count. But the Permian has something going for it called the Delaware Basin.
While the rig count in the Permian Basin is down by 197 units from its year-ago level of 362, some of the 165 rigs remaining are plying the Delaware sub-basin, which is "larger than life and here to stay," according to analysts at Wunderlich Securities Inc., who outlined the play in a recent note.
"In a $30-35/bbl environment, we are still seeing economic returns across various parts of the basin -- there is no single sweet spot. The Delaware Basin is prolific, and for those producers with a combination of improving productivity and sustainable efficiency gains, this basin will be one of the most resilient despite low crude prices."
Nationwide, though, the rig count has been falling so fast in recent weeks it's hard to keep up. On Feb. 5 the count was 571; then it dropped to 541 the following week before coming to rest a week later at the current tally of 514, according to Baker Hughes Inc.
During the week of Feb. 7 (when the U.S. count at the time was 571), Raymond James & Associates Inc. hosted its annual North American Prospects Expo dinner in Houston and polled attendees on their rig count expectations. "A real shocker...65% thought the rig count would end 2016 at 500 or lower!" the firm said in a note published Tuesday (Feb. 16).
"Keep in mind that we are currently setting all-time lows for drilling activity, so it is telling that the group thinks operators will drop at least another approximately 100 rigs and not meaningfully recover as we exit the year," Raymond James said.
And now the weekly count rests at 514, with likely further to fall. The U.S. natural gas-directed rig count continues a slow tease downward, losing one unit in the current week to rest at 101. Back on Feb. 5 it was at 104 when we said a break below 100 seemed imminent (see Shale Daily, Feb. 5).
About 70% of the attendees at the Raymond James dinner said the U.S. count will average 700 or less for all of next year. "This means our [poll] participants are preparing for much further production declines from the U.S. than we are modeling/expecting," Raymond James said. "Additionally, this potentially sets up for an even more bullish price response in 2017 in order to drive activity."
In the current rig count, there are 487 U.S. land rigs running, down 27 from the prior week, which represents the entirety of the U.S. decline for the week. Twenty-six of those units were oil-directed, and 17 of the departing rigs were horizontals. In Canada, the rig count fell by 16 to end at 206. Nine oil rigs departed, and seven gas-directed units were lost.
February has one more count left in it. The overall U.S. count could break below 500 next week while the oil tally could breach the 400 mark, and gas rigs could bust through 100.