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US Rig Count Continues To Plunge To 10-Month Lows
Just as T.Boone Pickens warned, watching the US Rig Count is key to comprehending the looming crisis in oil. The last 4 weeks alone have seen a drop of over 100 rigs - the 2nd fastest slide since 2001 in percentage terms. This is the worst December to January since 2008/9. As Pickens noted, "demand is down" - "lower demand is the main driver" - "rig count is gonna fall - drop 500 rigs in next 6-9 months"
Note that prices diverged lower as rig counts kept going before rolling over and then crashing...
Charts: Bloomberg
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Drill baby dr............
nevermind
Who the hell is gonna be punching holes in the ground to lose $$?
pods
You hinted at it in the first part of your post. The same people who invested billions of tax payers dollars into solar companies that went bankrupt.
You mean the Fed and the government and any cronies who can skim off of those transactions?
Newsflash: oil goes up, more people drill. Oil goes down, less people drill.
As we say in de patch: The cure for low oil prices is low oil prices.
where has Krudlow been hiding? not even a guest appearance on CNBS? maybe he's back on the Whiff...
assuming he ever got off it
Don't worry, banksters, the rig count numbers here only refer to drilling rigs, not rigging stuff like LIBOR, the gold fixing price and politicians. By the way, Bess Myerson just died, a day after political fixer David Garth. Both played a big role in getting Ed Koch elected as New York City mayor, Beth acting as his beard. The Mafia wanted Koch in as mayor and Hugh Carey in as governor, and what the mob wanted then, it got.
Wait 'til we start counting open gas pumps!
You assume the ridiculously high price of rigs will remain and that $220k engineers will continue to make that? Seems to me if oil drops, oil service prices drop too. Then we get more wells drilled and more production. The wells drilled back in 2007 were producing almost nothing, that is why the rig count dropped so quickly. The shale wells are tremendous producers they will continue to be drilled.
Services will do better since they don't actually drill holes, Halliburton and Schlumberger has been through this more than once.
Rigs are services and they drill holes. Not sure you know how this works.
I'm part owner in a small services company and our work will continue. We might have to lay off a few people and we won't be buying any new equipment this year but we look survivable for at least two years.
Yes but you will need to drop your prices is what I am getting at. If you don't someone else will. So I think you do know how this works, there are a lot more rigs than wells that really need drilling. A lot of wells don't have to get drilled unless they are for HBP purposes and 2015 is going to be the end of the road for the really good leases. The next round is the one where they go back and develop the play which means drilling the best spots and if you want to get your rigs used, prices will have to fall unless oil goes back up and that doesn't seem likely at this point. The Saudi's continue to dump oil in our markets and our govt isn't doing a thing to stop it.
We are on long term contract, so no undercutting and we have zero to do with drilling, we service established wells. I've lived in the oil patch most of my life and roughnecked on rigs when I was 16 back in the early 70's and I've seen this circus come and leave town more than once. The smart people know where the risk is and hedge accordingly.
You are a pumper I take it. The old strippers are likely to fold in this environment. I have a very valuable section in Reeves HBP on a 64 year old lease with three shit strippers that eke out 3bbl /day, I would love to see them fail at $40/bbl. It's the oil at 9200 feet that is where the money is, not 3000 feet.
Among other things, we do a lot of the little stuff like rework too.
Hope you do a better job than this. Where are you located?
http://tinypic.com/r/2vah1kz/8
http://tinypic.com/r/nbaex5/8
Those are the separators for these crappy strippers. There is one more that also sources the most rickety ass separator. I don't know how they stay up in high winds.
http://tinypic.com/r/ekf89f/8
Why would want to invest any money in a well that produces 3 bbl/day?
I don't want to but I own the land and the lease that my short sighted ancestors signed. You have to wonder about the companies that operate these wells though. The lease they have terminates at 3200 feet and XOM holds the deep rights which they lose if the stripper quits producing. The wells probably produce about $20k/mo with the higher oil prices of the last three years but the latest owner of them took over in 2001 when oil was around $20 and production was higher. There were five producers on that section back then, now it's down to three and only that far one really pumps much at all. It does 120 /mo while the other two struggle to put out 30 to 40 combined. As you can see, they don't do shit to keep the wells in good shape. The separators are nearly falling over and they don't even pick up the oil themselves. The pumper that runs the strippers on another section I have is actually a good guy and keeps his stuff in good order. These guys are real cheapskates and evasive. They also borrow a lot of money against the minerals.
Knuckledragger might help us out with why companies like this exist and how they can in the kind of environment we are entering into. All I know is that XOM has 30 days to get to drilling if these shit wells quit producing. They have told us they plan to do 8 wells in the next 18 months but that was assuming oil over $55 so guess we will see. I am rooting for the stripper operator to fail and XOM to give up the lease.
That must be an interesting lease contract. As for why companies like that exist, money of course and not necessarily that they make a profit but that they lose in a way the IRS accepts. I hope you get your rights back because that sounds like a frigging mess. I live in Texas and I own my mineral rights all the way to hell and I've had a couple of NatGas offers and my reply is a rousing F-U....
It's not interesting, it's just bad and was signed in 1950. One well can hold the entire section. There has been continuous production since 1960 which was when the primary term expired. They drilled three months before the term expired and got an extension. Anyway, one of the wells that is still producing is the first one drilled out there, pretty amazing but it's output is almost all water. It and the other one in that lease ID produce about 40-50 bbl/mo. The other one was drilled in 1992 and has produced 39k bbl in it's entire 22 year lifetime. My well in Culberson which is a new lease has produced 50,000 bbl and in just four months so far and only one month was full production. The well is still puking up parts of the frac plugs but now has two chokes so should be continuous going forward. That is how good the Wolfcamp wells can be. On that one we did Pugh clauses and they have to drill both above and below to hold any other horizons. So far they have only done Wolfcamp A and the primary term expires in May. We will get something back this June on that one and hopefully we will get a couple more wells fairly soon. However, XTO has said they plan to drill on the section with the strippers but we talked to the landman back in December when oil was still about $58.
LOL @ "you dont know what a service company is" from a moron to the owner of an OFS.
ZING!
Services is a broad term and rigs are services. E&P comnpanies hire services for all parts of the job including pumpers and workover and fishing. Not all services companies do the same things. Some prepare pads, some haul water and oil or chemicals. It's a very broad term but this thread was about rigs which is where my comment is based. Not sure why there has to be name calling in these posts.
Thanks for the lesson.
Most rigs are independent, though not all and rig count hasn't really gone down much yet. We'll know how bad the shakeout will be in six months. The company I'm invested in has been free and clear for nearly five years and we're actually looking at buying a few rigs if they go cheap in bankruptcy along with picking up a few leases if the price is right. Are we gonna drill if things pick up? OH HELL NO!!! That's for the optimists, we'll just park the rigs in the back lot and wait on the next boom.
Reports coming in already the auction yard is gonna be full this spring.
Keep your powder dry.
Halliburton and Schlumberger don't own or operate any rigs... not sure if you know how this works either.
Did I mention them? No, Knuckledragger did, but they don't do much if rigs aren't working. They fish, they log and they frac, takes rigs poking holes to keep them busy. HAL is a working interest owner in my shale well, they frac'd it and I have been on several of their frac jobs. HAL has bought a lot of other services companies lately that won't have work if rigs aren't turning. Rig prices are ridiculous right now, they are the first thing that has to drop because they are the majority of the cost of the well. Rigs is the topic of the OP and they are services.
Here is a Wolfcamp frac done by HAL.
https://www.youtube.com/watch?v=70r6TlKBZSU
Really? Better tell that to all the the guys that work for Weatherford Drilling International and Schlumberger IPM.
You some stund, by'e/
SLB Rigs: http://www.slb.com/services/additional/ipm/rigmanagement.aspx
WFT Rigs: http://www.weatherford.com/Products/Drilling/ContractDrillingRigs/RigFle...
HAL Rigs:
http://www.halliburton.com/en-US/ps/boots-coots/well-intervention/hydrau...
Forgot bout boots n coots.
Maybe we could staff the rigs with Mexicans?
Chinamen? Hell, that worked for the railroads.
Engineers just don't simply take a third of their salary on a moment's notice. The normal way that is done is to have a big shock, short layoff, followed by a couple thousand H1Bs, then a real layoff (of non H1Bs) and 4 years of being unemployed, followed by hiring at a third of their original price.
That shit takes time, and I don't think we have much of that left.
pods
Pods-
http://www.kplctv.com/story/25746090/man-camp-proposed-for-vinton-area
Friend told me about this a few days ago ...to house people from Philippines to work to build refinery in Lake Charles,La
Your reality post doesn't appear to be very popular. Maybe you should have said the opposite: Engineers right out of college should be making 1 million dollars a year and that way they can afford that shack in Houston, roach infested with telephone lines, fence and a street as the backyard view that has been on the market for about a year and is going for 1 million dollars...
I would if it means I can fill it with both houses of congress and all the workers on K-Street.
It's all rigged.
I see what you did there!
Isn't this unrigging, Doc?
But then again, unrigging is just the next step in rigging, otherwise you would be unable to rig again.
100 rigs x 500 bbl/day...$18M bbls off the markets...1 day of US consumption.
Newsflash: Rigs dont make or produce oil.
Whats with your weird math? 100x500 = 50,000 bbls
Further were talking oil here 18M means 18,000 bbls
The daily consumption is 18 million or 18MM
I just opened a tattoo shop in Minot, ND. Should I be worried?
I spent a couple winter months in Minot. It was so cold that the only thing we had to do was get drunk and screw. I liked that place.
Once you have driven through ND in the winter one gets a better grasp of what the concept of purgatory is all about.
I always enjoyed the winter exercise the army had in Alaska...in February....
Rig count is barely down but I agree, it needs to drop more in oder to get the daily prices of rigs down to match the price of oil right now. However, what might be more illustrative is if this writer would bother to post production along with rig count and price. Then we might get a better idea of where things are headed and people on this board might learn a thing or two.
https://www.youtube.com/watch?v=5wj_mVC9RYg
Watch the mid afternoon bounce in equities.
what will happen is the floor hands get laid off while drillers move to the most profitable rigs. old timers will tell you it sucks but the checks keep coming - the rest collect 470/week(max allowed in ND...
I grew up in an oil town during an oil bust. As I recall, there were a lot of 3 year old pick up trucks, for sale signs and empty Jim Beam bottles in the back lane.
son works for h and r, 3 holes til march and most likely "stack out-cold" til who the fuck knows when. lots of 50k+ duramax and cummins for repo bargins coming...
batten down the hatchs, mac and cheese, and poached deer...
road kill never looked so good, ha...
470/week doesn't even make the truck payment- lots of pissed off hapless rough necks...
divorce lawyers heyday, time to sow some oats and batter'd shelters full. round of local business failures, lost homes and busted lives...
shit is gonna happen..
As I recall, my first ride was paid for in cash for about 50 percent less than blue book. I think I might open up a chain of Jim Beam stands.
apple flavored crown! and/or fireball, ha...
second thought - fireball due to cash flow...
All the markets are rigged. Yes, the rig count should drop.
We rigged some folks.
Fantastic find!
Tyler, please give the above post the attention it deserves.
what that fucker needs is a toilet roll dispenser hanging from his chin to clean up after every time he talks...
Doesn't matter, he'll never be up for re-erection again. What more can be expected from a rigro?
$20 and $30 puts are showing up....that would be epic.
http://www.marketwatch.com/story/some-traders-are-betting-on-20-oil-2015...
looks like markets are temporarily functioning.
Economic consequences, bitchez.
OIL is headed way down long term. Short term, it should find temporary support shortly...
http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...
Let's hope so.
I need to buy new biscuits for the S4 and Tundra this summer.
Cheap oil = cheap tires
Perhaps $15-20, but if you are going to predict the future, why use sticks, random numbers and letters to do it when Ouija boards and Tarot cards are far more accurate?
$10 by March.
Does the US allow any new drilling in US waters?
I'm sure there's rig drill permit requests out everywhere, has the state started saying yes yet?
Open a well off California, Smitty. Just keep a watch out for tofu loaded catapults and patchouli moltovs.
The whole permit, environmental impact statements, exploration, and drilling take yesrs to happen. I really doubt that ones in progress will get stopped (hence you see Iran, Iraq, and Russia actually increasing production). Likewise, the availability of ZIRP money will move some new projects along - at least up to the point where the major expenses start.
who stands to be fucked over the most? ussa or r? rev up the digital money spitter outer. gonna need a gusher of liquidity to patch over the oil fallout. russia might just be much much better when this all plays out. j a wag...
The difference between rigs now and rigs at any time in the past is ZIRP.
New projects are paid for by loans. When those loans carry no interest (as opposed to 20% interest during the last Oil Boom in the1980s) the whole definition of what is or is not sustainable, and on what timeline, is different.
The smart players in the oil patch are dropping unprofitable rigs as fast as they can, while simultaneously hanging on to leveraged cash, so they can buy up their failed competitors assets and bounce back quickly when the House of Saud cracks and prices go back up.
Saudi's are shooting their wad here to control the market. The survivors who kept dry powder will be in control of the next market.
Notice that both 'huge drops' lasted only a few months - usually over winter - before rebounding strongly into late spring and summer the following year. Oil companies and oligarchs and big banks are not likely to hand US consumers a gift of cheap gas for too much longer.
Let me write the headling for May of 2015 -- "with the large increase in demand from lower oil prices, and the shutting down of a large number of rigs, we see a severe oil shortage developing this summer that will drive up oil prices". Of course, this will be written by big bank analysts who just opened large, long positions in oil.
small term inner-pattern but the much larger pattern is to follow the WTI price. So a big drop in WTI will mean a big drop in rigs with a tiny increase (still a big drop) potentially (not assuredly) now & then. Still a drop.
Hussein Obanana will invent any Affordable Rig Act.
He tries to keep everybody smiling.
I've got 25% working interest on 220,000 acres in Pecos County Texas - looking for a partner - mopickens@gmail.com