Friday, June 7, 2019

Weekly Number Of Active Oil Rigs Meaningless -- June 7, 2019

I've maintained for quite some time, probably since 2014 or thereabouts, that rig counts no longer matter (not to be taken out of context).

I was reminded of that when I saw this headline over at oilprice.

For the record:
  • oil rigs fell by 11 (to 789; or a decrease of 1.375% -- big whoop!)
  • natural rigs actually increased by 2 (to 186, or an increase of 1% -- another big whoop!)
  • overall, a net decrease of 9 rigs (or a decrease of 0.9% -- not even a 1% decrease and that's the big headline -- wow -- completely missing the point)
Much more relevant: number of wells offline for operational reasons and wells drilled to depth but not completed (DUCs). I track that in the Bakken at this site. These are wells that could be brought on line within days in some cases, weeks in all cases, if necessary.

By my reckoning there are upwards of three-years worth of inactive wells/DUCs in the Bakken. Stop drilling in the Bakken today, and the state could clip along for three years just be bringing those wells into production.

And that doesn't even count the tens of thousands, perhaps twenty thousand wells that should be re-fracked in the Bakken with modern completion strategics and state-of-the-art technology.

I don't track the numbers in the Permian but my hunch is that at some point in the future, the similar data point in the Permian will be upwards of 10 times what it is in the Bakken.

I track the number of DUCs and inactive wells in North Dakota at this site.

One can also track posts on DUCs using this "search."

Related tags:
Much more relevant than rig counts:
  • number of DUCs
  • fracking backlog
  • drilling rig efficiency
  • the EPA drilling reports (the "dashboards")
By the way, the "raw" number of rigs -- worldwide -- added or taken down is incredibly useless information. If one wants to consider the number of rigs as somewhat meaningful, we need to know:
  • regionally, the rig numbers, not the global numbers; and, 
  • rigs being added or taken down on a percentage basis
Even when the number of active rigs in North Dakota was hitting "modern" lows, North Dakota was still setting all-time production records.

Some oft-visited posts:


  1. Irrelevant is overdoing it.

    1. Yes, the efficiency is nonlinear. When rigs are added, they move to the next marginal project or come off the next marginal project when cut. So rigs 60-120 not double new production (versus first 60 rigs in the Bakken) But still, there's added production from added rigs and visa versa.

    2. OK, sure even overall rig efficiency has increased over time Say 2012 versus now. But still, for now, there's an impact from rig count. More rigs (at a certain point in time) leads to more wells leads to more production. The DUCs are a red herring--they're inventory. They get drilled eventually.

    3. There is a useful business insight when rigs get dropped or added. Companies have a choice of adding or cutting rigs. There are plenty of rigs available. If they choose to cut rigs it sends a message that they lack projects for them. And visa versa when rigs are added. So it's not irrelevant.

    4. Agreed that week to week is noise. But when you see broad trends over several weeks and large changes it means something.

    1. "Irrelevant is overdoing it." That's why I say "don't take it out of context. But when someone says the number of rigs decrease by one or two and oil production continues to increase, it tells me somebody is either posting headlines as clickbait or they don't understand "the Bakken." But with three years of wells off-line/DUCs, that number is more important than the number of rigs up or down each week.

    2. Yeah, but if rigs go over 70, I'll still be touting it...;-)

    3. I definitely will be excited to see the rig count in North Dakota break into the 70's.