Sunday, September 16, 2012

Laying Down Rigs to Cut Costs -- MRO

Updates

September 18, 2012: Give me a break on all this chatter about rig counts falling. After hitting a post-boom low of 189 or 188 (I forget which), it held steady at 192 for quite some time. Today, it is up to 196. If companies are laying down rigs, they are laying down older, less efficient rigs. Where it used to take them up to 60 days to drill to total depth (back when the boom began), they are now drilling to total depth in 15 days and taking hours to move to the next well instead of days, due to pad drilling.

CRC has it right: folks talking about the declining rig count are looking for signs that the boom is over. Despite data to the contrary.

Original Post
Link here to the Bismarck Tribune.

Laying down rigs will cut costs, but laying down rigs to cut costs is a red herring of a story in the Bakken. Regular readers know my position on this and why I saw that.

I've blogged about it several times. If I have time, maybe I will go back and tag those earlier blogs so it's easier for newbies to read why I think this.


2 comments:

  1. I think that other companies will follow Marathon in cutting back drilling activity due to the cost factor. One factor to consider in these cutbacks will be the leases which are expiring. My thought is that companies will reduce their rig count while trying to schedule these expiring leases. Along with this period of cutbacks, there will be several companies selling out while the market is so attractive. I see the rest of 2012 and most of 2013 as a time for the big operators to begin buyouts of some smaller operators who have attractive mineral holdings but lack the capital to maintain an adequete drilling schedule.

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    Replies
    1. You are missing the point. Laying down rigs will cut costs, but cutting costs is not why they are laying down rigs. The Bakken has moved from exploration stage to manufacturing stage; the less efficient rigs are being laid down; Bakken-specialty rigs are not being laid down; pad drilling is the norm; they're reaching total depth in 15 days vs 60 days; the list goes on.

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