Wednesday, July 17, 2013

US Oil Rig Count and Oil Production

The above shows the most recent weekly oil rig counts for the United States (the data are from Baker Hughes).  The huge boom in drilling peaked in the middle of 2012.  There was then a small decline through the early months of 2013.  That has since been partly made up - rig count is still not back to the level  of mid 2012.

So at least for the time being, the US rig count appears to have stabilized around the 1400 level.  It seems this is unlikely to be consistent with large further increases in US oil production.  However, production was still increasing as of the most recently available data from the EIA (April):

To get a better sense of the relative timing of things, here's the data just since the beginning of 2009, with both rig count and production in the same graph:

You can see (via the black line) that there's about a two year offset between the start of the drilling boom and the start of the production surge.  If the leveling off in the drilling boom is similar, we might expect production to level off some time in 2014.


rjs said...

hard to say how much rig counts matter for production anymore with octopus technology...multiple wells drilled from one pad...

Alexander Ac said...

Fine to see Obama "climate plan" in action :-)


Southern Limits said...

Hi Stuart,

I think footage drilled is a more useful metric than rig count for what you are trying to do here.

We can test the levelling off hypothesis too. Any more than two years is getting into statistically dangerous territory because your certainty decreases rapidly.

It certainly looks like drilling is likely to level off but the data is only until the end of 2010.

Production data is more up to date and so gives us a better idea of the immediate future. Production will still grow but at a much slower rate than it has been.

But does this really mean anything? It's hard to say for sure because there are so many more factors that play into production levels such as market forces, geopolitical developments, business choices and government intervention. I would be very careful of taking any prediction too seriously.

Nice site btw.

petemason said...

I noticed that drilling permit activity was down sharply in May/June, according to the North Dakota Industrial Commission, Department of Mineral Resources, Oil and Gas Division, Director's cut report this month.

"Apr Permitting: 202 drilling and 0 seismic
May Permitting: 211 drilling and 0 seismic
Jun Permitting: 165 drilling and 0 seismic (all time high was 370 in Oct 2012)

"Drilling permit activity was down sharply in May. There is a sufficient permit inventory to accommodate multi-well pads, the inability to construct locations during load restrictions, and the time required to deal with federal hydraulic fracturing rules if required.

"Load restrictions have remained in place longer than ever before because May 2013 was the wettest on record. Uncertainty surrounding federal policies on taxation and hydraulic fracturing regulation continue to make investors nervous. Pressure on the federal budget has led to a budget proposal that eliminates deductions for intangible drilling costs and the depletion allowance.

Mr. Sunshine said...

The percentage ration between number of rigs and oil produced seems top heavy on rigs, or light on oil.

buck smith said...

"It seems this is unlikely to be consistent with large further increases in US oil production."

I don't think this is true. I'd like to work up a little spreadsheet model of this. I believe what we will see is the big increase from 200 rigs before 2004 to over 1200 rigs now assures steadily increasing production until the price falls and rig count goes down dramatically.

The assumptions in the model are each rig is active 70% of the time. Each rig drills a well every two weeks while active. Each well starts at 200 bpd and declines to 50bpd over the first two years then is pretty level at 50 bpd.

Based on this 1200 rigs are creating 1200 times 50 times 17 = 1020000 of new long term production. That lines up pretty with the data from mid 2011 to present.

rjs said...

buck, pretty sure you can increase the rig utilization in your model, even if i'm not sure about the rest...
i just finished writing about industrial production & capacity utilization, and the Fed shows an operating rate of 87.9% for mining equipment, which is the category including drilling rigs...

and since "octopus technology" seems to be an obscure term for the methods i mentioned, here is the oil & energy inisder report where i read about it...

"Last year, Devon Energy (DVN) drilled 36 wells from a single pad site using Octopus technology in the Marcellus Shale. More recently, Encana (ECA) drilled 51 wells covering 640 underground acres from a single pad site with a surface area of only 4.6 acres in Colorado. Multi-well pad drilling is also revolutionizing drilling in Bakken, and this is definitely the long-term outlook for shale. It will become the norm."

advantage is you dont have to move the rig...