October 26, 2010

How long can the newest “rock stars” sustain the overall unconventional rig count? The Eagle Ford has shown remarkable growth, up 143% since 2Q 2010 and accounting for 75% of the increase in the unconventional tally since then, according to last week’s issue of The Unconventional Drilling Report. And the Bakken count is up 140% since the first of the year. There is certainly more room for the Eagle Ford to run, with gas/condensate targets attracting increased activity.  And the Bakken has room to grow, as the Montana side sparks interest anew.

But the other major shales have shown a surprising resilience too, holding steady across the board—and with the Marcellus even posting a 39% gain since 2Q 2010. Also worth noting are 14% and 43% increases, respectively, for the overall tight sands and CBM rig counts since the 2Q—despite a drop of about 30% in gas prices. It looks as if it will take sub-$3/Mcf gas to knock the unconventional rig count off its plateau, even if its growth slows down.

October 19, 2010

Oil prices are driving the rig count today, and that is likely to be the case for months—if not years—to come, according to The Land Rig Newsletter’s Biweekly Report. Lately there has been a plateau in the rig count, with the overall tally flattening as the gas rig count’s slide is offset—and sometimes not—by modest gains in the oil rig count. So it was a mild surprise to see a 74-unit jump in a comparison of biweekly tallies. Oil rigs accounted for 55 of that total, but the 19-unit increase in the gas rig count was its biggest sequential gain since mid-February. The modest surprise is rooted in the resilience of unconventional gas plays.

So will that resilience persist? Until economic recovery can revive gas demand, gas rig counts will tread water at best, despite the occasional anomaly. Right now, oil rigs are approaching 800, and gas rigs are struggling to stay near 900. Expect to see those counts swap out next year—and some gas rig losses to come on the unconventional side.

October 12, 2010

A stunning 21-unit drop in the Bakken early this month pulled the entire unconventional drilling group down. Had the Bakken tally remained flat, the unconventional rig count would have broken 800 for the first time ever after hovering near that milestone since midsummer, according to The Land Rig Newsletter’s Unconventional Drilling Report.

What makes it doubly surprising is that the biggest biweekly decline has occurred in the Bakken, everyone’s darling these days. But 800 reaching is still just around the corner. The Bakken count decline masks a surge in the float—rigs that are moving onto or off or are waiting on location.

In the latest issue of The Land Rig Newsletter’s Biweekly Report, the Rockies had by far the biggest float number among regions, both in absolute terms and especially as a percent (15%) of the active fleet in the region. Nearly 70% of that Rockies float was in the Bakken.

October 5, 2010


Is it too soon to talk about a declining rig count instead of plateau? The Land Rig Newsletter thinks so, even if the total rig count has fallen for four consecutive biweekly periods. After all, the drop from the year’s peak of 1,647 set August 13 to the tally at end-September is a mere 1.6%. It isn’t a decline in shallow drilling pulling down the overall rig count.

Both the oil and gas shallow tallies are holding up well, as is the oil side of the Traditional (>5,000 ft) rig count. But the count of rigs drilling for gas below 5,000 ft has fallen the past four periods by almost the same number of units as the overall rig count has. Since gas shales overall have held up well too, the culprit is conventional gas drilling below 5,000 ft.

The state of the market today and continued strength in unconventional drilling, especially for liquids, suggests more of the same:  Resource plays stay in the driver’s seat, and oil rig gains will continue to offset gas rig losses.