[Ferretlover]

North American Rotary Rig Counts :
The U.S. rotary rig count was up 4 at 920 for the week of July 17, 2009. It is 1,008 (52.3%) rigs lower than last year.
The number of rotary rigs drilling for oil is up 10 at 244. There are 141 fewer rigs targeting oil than last year. Rigs currently drilling for oil represent 26.5% percent of total drilling activity.
Rigs directed toward natural gas were down 7 at 665. The number of rigs currently drilling for gas is 869 less than last year's level of 1534.
Year-over-year oil exploration in the US is down 36.6 percent. Gas exploration is down 56.6 percent. The weekly average of crude oil spot prices is 55.5 percent lower than last year and natural gas spot prices are 71.1 percent lower. …

North American Rig Count
07/17/09 07/10/09 07/18/08 WeeklyChange AnnualPercent WeeklyChange AnnualPercent:
Total U.S. 920 916 1,928 4 (1,008) 0.4% -52.3%
Offshore 35 37 69 (2) (34) -5.4% -49.3%
Land 885 879 1,859 6 (974) 0.7% -52.4%
Inland Waters 8 8 26 0 (18) 0.0% -69.2%
Oil 244 234 385 10 (141) 4.3% -36.6%
Percent 26.5% 25.5% 20.0% 1.0% 6.6%
Gas 665 672 1,534 (7) (869) -1.0% -56.6%
Percent 72.3% 73.4% 79.6% -1.1% -7.3%
Directional 176 165 384 11 -208 6.7% -54.2%
Horizontal 399 390 568 9 -169 2.3% -29.8%
Gulf of Mexico 35 37 69 -2 -34 -5.4% -49.3%
Gulf Oil 4 4 2 0 2 0.0% 100.0%
Percent 11.4% 10.8% 2.9% 0.6% 8.5%
Gulf Gas 31 33 67 -2 -36 -6.1% -53.7%
Percent 88.6% 89.2% 97.1% -0.6% -8.5%
Canada 152 178 410 (26) (258) -14.6% -62.9%
Oil 90 96 180 (6) (90) -6.3% -50.0%
Percent 59.2% 53.9% 43.9% 5.3% 15.3%
Gas 62 82 230 (20) (168) -24.4% -73.0%
Percent 40.8% 46.1% 56.1% -5.3% -15.3%
North America 1,072 1,094 2,338 (22) (1,266) -2.0% -54.1%

WTRG

[TheAntiDoomer]

Yup, that's what happens when you have a oil glut as we have now.

[Maddog78]

Yeah, it's ugly out there.
Several of my colleagues have lost their jobs and many have taken pay cuts, myself included.
My companies ops. in my area of responsibility have gone from 17 rigs to 10.
If the gas price doesn't get better soon, and it doesn't look like it will, we will be down to 7 by the end of the year.
This is the 3rd major bust I've seen in the business the last 30 yrs.
It can be a tough business. No wonder young engineers are gun shy about entering the business.
Big entry level salaries, everything is looking good and you think you have it made then bang, a 2 or 3 yr. downturn and you're in the U.I. line.

It will be interesting to see how we are able to man up when the inevitable upswing occurs.
Most likely we will be back to bidding wars for good people again.
That could take 2 or 3 years though.

[pup55]

that's what happens when you have a oil glut as we have now

To be a bit more precise, it's what happens when the cost and risk of drilling exceeds the expected rate of return for the project.....

The cheapest and least risky holes will be drilled first.

[Maddog78]

Expected rate of return is always a crap shoot in the oil business. You make your best guess and take your chances.
Right now it is the glut, which has reduced commodity prices, which has reduced cash flow that is the main culprit for the drilling slowdown. Throw in the difficulty in getting credit for any new project and that just leaves the majors with ample cash reserves able to proceed at a "usual" pace.

[obixman]

Here's the thing about rotary rig counts...

They're an estimate...

and not a very good one either.

My company deveops some for internal use and there are 3 others we look at - from state to state they differ - sometimes by an order of magnitude, and I would have to say that the BH count is far from the most accurate.

However, if you look at the curve shape on all of them you will see that the count loss has flattened out - or even turned around. The count is absolutely down from last year, but the losses have stopped and have been flat or rebounded for about the last 4 weeks or so..

If you look at the rigs in terms of well type, the loss in horizontal rigs is (percentage wise) less than the loss in vertical rig operations.

What this means is that the industry has responded to the rebound in Oil prices of the last few months and the unconvential gas plays are continuing (but at a reduced level)

[TheDude]

From WTRG Rig Count: Rotary Rig Count and Workover Rig Count page. Looks like '86 redux, albeit as is mentioned above the current drop off is largely gas rigs. But the situation is far different, in that we now need a tremendous number of holes to maintain UNG production. The outcome of the current dropoff could have some interesting ramifications, if storage levels can't be maintained; likely there would be an outcry for nationalization to ensure supply; or more stringent regulation; or subsidization.

[Maddog78]

if storage levels can't be maintained

Give us a 7 buck gas price and there will be no problem maintaining storage levels.

[TheDude]

Sure; but are you ready for a career chock full of short term job cycles, even something like bi-seasonal labor? That's what this looks to be shaping up to, given the number of rigs you need to account for these brutal decline rates. #2 lump of coal in your stocking is the future of credit for independents, which is shaping up to be a real mess as well, given all the economic indigestion we still have to deal with.

[TheAntiDoomer]

Dude, have you even been following OF2's Nat Gas threads? We could punch holes in those shales for decades and not run out of real estate. You're a damn fool if you think there is any sort of natural gas shortage looming in any forseeable future.

From WTRG Rig Count: Rotary Rig Count and Workover Rig Count page. Looks like '86 redux, albeit as is mentioned above the current drop off is largely gas rigs. But the situation is far different, in that we now need a tremendous number of holes to maintain UNG production. The outcome of the current dropoff could have some interesting ramifications, if storage levels can't be maintained; likely there would be an outcry for nationalization to ensure supply; or more stringent regulation; or subsidization.

[TheAntiDoomer]

On another note its pretty funny watching two internet cowboys like pstarr and dude tell a seasoned oil and gas expert how the industry works.

[Maddog78]

Sure; but are you ready for a career chock full of short term job cycles, even something like bi-seasonal labor? That's what this looks to be shaping up to, given the number of rigs you need to account for these brutal decline rates. #2 lump of coal in your stocking is the future of credit for independants, which is shaping up to be a real mess as well, given all the economic indigestion we still have to deal with.

That's what I was saying earlier. Career already has been chock full of cycles. I don't expect that to change any time soon. Nature of the beast.
7 buck nat. gas solves all credit problems. My company operates primarily on cash flow as do most independents.
We'd be more than happy to get 17 rigs back drilling again and take care of your storage level worries.

[Maddog78]

On another note its pretty funny watching two internet cowboys like pstarr and dude tell a seasoned oil and gas expert how the industry works.

Well they probably know better than me. I'm just responsible for preparing & implementing a 1/2 billion dollar E&P budget so what do I know?

EDIT: Obviously a bit too much hubris in the above statement.
No one man runs a budget that size on his own. Lots of help from both above and below the ladder. Also our budget is actually quite a bit more than that. Hopefully it won't be too much less next year.

[TheDude]

1/2 of NG production in NA is from these wells that decline north of 50%, a treadmill. Dave Hughes is as astute an industry insider as they come and has been warning about the feasibility of sustaining drilling on these levels for some time. There are numerous issues with the environmental side of all this UNG drilling, frac compounds making their way into groundwater for one. I post about all this just to spread the word around about these matters; eventually they may become a political roadblock. Not saying this is inevitable, forewarned is forearmed and so forth.

OF2 is just pumping stocks. A guy who talks about the dribble coming out of the Bakken like it's going to be the solution to the US energy trade deficit isn't anyone to listen to seriously.

Credit is an issue for drillers, everyone needs the odd LOC: U.S. Natural Gas Rig Count at Seven Year Low -- Seeking Alpha

Tighter access to credit and a 70 percent slide in natural gas prices to about $3.50 per mmBtu after peaking above $13 last July have forced many producers to scale back drilling operations. But with the natural gas drilling rig count now firmly entrenched below 700, and monthly production down four straight months through June, some analysts expect to see the supply-demand balance tighten soon.

This decade has seen some pretty unnatural price spikes:



If $7 is your floor some kind of pricing mechanism is in order, I'd say, especially if we're going with NG for vehicles.

Glad you're here and I pay attention to your posts, maddog. But if it's only those on the inside you want to debate or discuss with you're going to pretty lonely.

[Maddog78]

Well, in your quote they did say and a 70 percent slide etc.
For us and I believe most, the 70 percent slide is more significant than the credit squeeze although both have played a part.

I would say $5 is more our floor to keep going at this level and $7 would allow us to get back to our previous rig count. If it stays below $5 we will drop more rigs this winter.

The groundwater could become an issue, no doubt, because you never know for sure how the political winds will blow. The formations we frac are so many layers below where the ground water lies that it really doesn't make sense to me but as I said you never know how this issue could shake out.

Glad you're here and I pay attention to your posts, maddog. But if it's only those on the inside you want to debate or discuss with you're going to pretty lonely.

Not a problem, it was actually The AntiDoomer that called you an internet cowboy not me.
I try and learn something from everyone here.
Some educate me more than others.