February 23, 2010

The surge in shallow oil drilling by mom n’ pop operators is winding down, easing growth in the overall rig count. A plunge of 30 rigs drilling for shallow oil offset most of the 39-unit gain in the traditional (>5,000 ft) rig count in comparing the two most recent biweekly periods. Any spillover in 2010 from yearend activity spurred by spending down budgets and holding acreage seems to have dissipated among small, privately held operators.

The little guys continue to cede ground to the bigger public companies as drilling activity continues to shift more toward unconventional oil and gas plays and away from shallow oil drilling. The tally of rigs drilling to <5,000 ft fell by 28 overall, led by declines in the shallow oil counts of 17 in the Midcontinent and 6 in the Permian Basin region. Those decreases paralleled rig count drops of 28 among privately held companies and 30 among operators running 3 rigs or fewer. 

February 16, 2010

The count of rigs for small fleets (3 or fewer) recovered in 3Q 2009—reflecting continued support of oil prices above $60/barrel—and has remained above 400 ever since. But the more recent surge of activity among large-fleet operators is overshadowing the little guys’ work.  Large- (10+ rigs) and midsized-fleet (4-9 rigs) counts are both roughly where they were a year ago, but the big story has been the large fleet’s phenomenal growth beginning in 4Q 2009. The small and large fleets have essentially switched market shares since early fall 2009: The large-fleet market share swelled from about 37% in mid-October to almost 49% in the latest tally, as it added 200 rigs, while the small-fleet market share reversed from almost 46% to about 36%. Given that oil and gas market fundamentals both firmed in the last quarter, one suspects the bigger boys’ greater strength in raising capital had a large role to play in the reversal.

February 9, 2010

Bigger fleets and deeper wells are driving the overall rig count today. And support for unconventional drilling activity continues to broaden beyond the usual suspects. The overall rig count notched a gain of 38 units vs. the prior biweekly period, as a 48-rig gain in the total Traditional count (>5,000 ft) more than offset a loss of 10 shallow gas rigs.

In the Traditional rig count category, oil rigs jumped by 29, gas rigs by 19, and horizontal rigs by 12. The gains or holds were spread across the board for all major shale, tight sands, and coalbed methane plays, with one glaring exception:  the Haynesville, which finally took a breather, dropping 8 rigs in a comparison of biweekly periods.

The Haynesville decline was offset by a still-irrepressible Marcellus, adding another 10 units. Meanwhile, the tight sands plays are at their highest rig activity levels in months, topping quarterly averages seen since 1Q 2009.

February 2, 2010

Drilling activity is picking up in South Texas, home of the Eagle Ford Shale. While The Land Rig Newsletter Biweekly Report currently does not break out rig count details on the Eagle Ford, the latest issue did note that an additional 11 rigs (13%) found a home in South Texas, raising the region’s total to 83.

Eagle Ford interest appears to be spurring a flurry of permitting activity as well. The South Texas region logged a surge in permits at mid-January, more than double prior biweekly reports and the highest level since a comparable surge in late October 2009.

The region posting the biggest gains in rig count is ArkLaTex, according to the latest Biweekly Report, as operators continued to seek opportunities in two of the five major gas shale plays—the Haynesville and the Fayetteville. Recent ExxonMobil acquisition target XTO added four rigs to the Fayetteville, bringing its tally there to nine.