From the Energy Information Administration:
In the News:
Despite decline in rigs, natural gas production forecast to increase
The total U.S. rig count as of March 6 was 1192, 600 lower than year-ago levels, according to data from Baker Hughes. Nearly 87% of the decline was from rigs designated as targeting oil, and more than half of this year-over-year decline occurred in Texas, where rig levels over last year fell by 326. The decline in Texas was driven by rig count declines of 173 and 73 in the Permian and Eagle Ford basins, respectively. The remainder of the overall decline, 13%, came from lower natural gas rig levels. As of March 6, only 26% (268) of total rigs were designated as targeting natural gas, a decrease of 77 rigs compared with last year's natural gas rig levels.
Despite declining rig counts, EIA forecasts continued growth in natural gas production over the next two years. In the past, the number of gas-oriented drilling rigs in a particular region was a common metric for estimating the production of natural gas. However, over the last several years, natural gas production has steadily increased, while the number of active rigs characterized as targeting natural gas has fallen dramatically.
There are several reasons that have contributed to the breakdown of traditional methods that seek to estimate natural gas production based principally on rig counts. To start, with the development of shale resources, there is an increased integration of oil and gas production, and natural gas is often produced from rigs that are targeting oil. Additionally, there have been increases in drilling efficiency, or the number of wells drilled per rig each month.
There is also a backlog of wells that have been drilled but not yet completed, which acts as a cushion for well additions, offsetting the more immediate decreases in drilling and permitting activity. As of the end of January, at most major plays in the United States, the backlog ranged from three to seven months. However, when drilling activity remains at reduced levels long enough to outlast the cushioning effect of the well-completion backlog, the number of new wells brought online will begin to decrease, which can eventually reduce production rates. Additionally, production may decline should producers defer completions....MUCH MORE
Feb. 11
"Why Rig Cuts Won't Save Oil: Goldman"
EIA Drilling Productivity Report: Production Per Rig Up Across the Most Prolific Shale Plays
Feb. 9
Astenbeck Capital's Andrew Hall: Oil Is Going To $65 And The Surviving Shale Plays Will Do Just Fine
I think he's early but right.
There are still 1100 oil rigs operating in the U.S. and they are now being directed to the lowest risk plays i.e. U.S. production won't start to decline until the third or possibly even the fourth quarter.
Probably more importantly the dollar is strong and any further appreciation could quickly knock 15-20% of the price of oil regardless of fundamentals.
On the demand side: in December and January China basically leased every tanker in the world to hoard the lower priced goo, now India is going to do the same albeit with less storage available.
Should they fill their tank farms and eliminate that source of demand we're set up for another dramatic decline....
Feb. 2
EIA Drilling Productivity Report
This is three weeks late but I wanted it on the blog, searchable and stuff. The next release is in a week and we should see enough of a gain in efficiency to offset some of the exuberance from falling rig counts....
