For the past several months, the US drilling industry has braced for a violent activity crash in December as E&P budgets run dry and the holiday slowdown kicks in.
But with just a week to go in December, the Baker Hughes rig count isn’t showing this collapse. US land drilling was down only 9 rigs this week and is down 38 so far this month. In the past few weeks we’ve seen the large service and drilling firms begin to talk about how the fall-off might not be as bad as previously anticipated.
It looks like the Grinch may not steal the drillers’ Christmas (or what’s left of it) after all. The rig count in the Permian Basin this week actually increased by 6 rigs to 212, and US oil drilling activity was only down 3 units.
Further declines are surely coming in early-2016, but the December drift instead of December cliff may precede an orderly wind down in 1Q rather than the chaotic-type collapse that characterized early-2015. As noted several weeks ago, the magnitude of 2015 declines limit further downside, and most industry benchmarks will trough in 2016.
Weekly North American Rig Count Statistics
The North America rig count fell 45 units last week, with the expected seasonal break in Canada driving most of the fall. WTI has moved firmly into the mid-$30s just as 2016 budget season for the Independents is underway. We believe this skews rig count direction lower in the weeks and months ahead.
If our estimate of a 20%+ drop in 2016 NAM E&P spending proves correct, rigs will continue to drift into yards during 1H16.
While the weekly figures will ebb and flow, the recent leg down in oil prices jeopardizes stability, and the 600 rig count level for US land could be tested in the weeks ahead.
In Canada, the rig count fell 36 rigs to 126 for the week. The seasonal winter break is upon us in Canada.
A regional summary of rig counts by key basins is below. With 212 rigs working, the Permian is still the most active basin, and it was up 6 rigs on the week. The Eagle Ford, with 77 rigs running, is the second most active basin, and it was flat last week. With 55 rigs running, activity in the Bakken was down 3 last week.