Permian Basin Rig Count Hits 400 -- Data Points Reflect Implications for the Bakken

Link here.

Drilling activity in the Permian Basin has rebounded not only from the declines seen in the economic downturn of 2009-2010 but is approaching, if not surpassing, levels not seen since the boom of the early 1980s.

Energy Economist Karr Ingham of Amarillo reported the average monthly rig count for the three Railroad Commission districts that cover West Texas - Districts 7C, 8 and 8A - averaged 403 rigs in November, up 45 percent from 278 the previous November and averaged 350 in the first 11 months of 2011, up 50.9 percent from 232 in the same period of 2010.

"That's an extraordinary milestone," Ingham commented, noting that the rig count average had topped out at 241 in August 2008. He said that as best he could determine from research, the highest average was 320 rigs in December 1984. "In other words, these are clearly historic times for the region in terms of oil and gas exploration and production activity, made entirely possible by the advancement of technology and price, which makes it affordable and economic to employ that technology."

Data points:

• one reason the rig count has risen is that operators cut their drilling budgets that targeted natural gas, allowing for rigs to be moved into oil-rich basins like the Permian Basin or the Bakken. If natural gas prices recover, he predicted the industry will see another tight market
• "If oil remains at $90 or above, the oil markets will stay very active," he said. "It will put only more of a strain on the existing rig fleet if natural gas kicks in."