US Oil Rig Count -2, Gas Rigs +6
October 28, 2016 —ENERGY UPDATE
For the first time in 4 months, the US Oil Rig Count declined down 2 to 441 as the total rig count rose 4 to 557 (gas rigs up 6). Oil remains below the $50.00 level for now.
West Texas Intermediate (WTI) crude oil for December delivery traded down on Friday to settle at $48.70. The U.S. Energy Information Administration (EIA) reported last Thursday that crude supplies had decreased by 600,000 barrels in the week ended October 21 and that gasoline supplies had dropped by 2 million barrels.
Global benchmark Brent crude prices fell 1.51 percent to $49.71 a barrel, the lowest since Sept. 30.
The two benchmarks showed a weekly drop of about 4 percent, the biggest since mid-September.
Natural gas for December delivery closed the week at $3.10 per million BTUs, down 24 cents on the near-month contract compared with the prior week.
US crude production during the week ended Oct. 21 increased 40,000 b/d to just more than 8.5 million b/d, down 608,000 b/d year-over-year, according to data from the US Energy Information Administration. The Lower 48 added 28,000 b/d to just more than 8 million b/d, down 604,000 b/d, while Alaska added 12,000 b/d.
Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) reported third-quarter results on Friday and garnered different reactions from investors. Exxon’s shares dropped about 2.5%, while Chevron’s rose by 3.9%. Both beat profit estimates, but Exxon missed on revenues. For the nine months through September Chevron posted a net loss of $900 million versus income of $5.2 billion a year ago.
On the conference call, Exxon said that it may have to remove 4.6 billion barrels of oil equivalent from its proved reserves as a result of an investigation by the U.S. Securities and Exchange Commission. In order to be counted as “proved,” the oil must have a 90% probability of being produced at a profit with current technology. Exxon’s questionable production is mostly located in Canada, and it should be noted that the company is the only major producer that has not written down the value of its reserves over the past 24 months.
Chevron exceeded analyst expectations, revealing that it plans to spend more on its Permian Basin assets in the next few years, a basin it where it has owned assets since the early 1900’s. Chevron owns more than 1.5 million acres, a large percentage of which has the minimum burden of 1/8th royalty on its leases, providing a higher net revenue on production. It also owns a large percentage of the minerals outright.
A company executive said that Chevron has begun drilling wells in the Permian that share the same design features. The company believes that the technique could boost production from the Permian by 200,000 barrels a day by the end of the decade. Chevron operated five rigs in the Permian in the first half of this year and has lowered development costs by 30%.
RIG COUNT – US Total +4, Now at 557
Oil Rigs – First decline since June 24 week
In the week ended October 28, five U.S. land-based rigs were put back in play during the week ending Friday, bringing the tally to 533 running. One rig left the offshore, making for a net U.S. gain of four to rest at 557 running.
Two U.S. oil rigs left, but six natural gas rigs came back. The return of five horizontals and three directionals was offset by the departure of four vertical rigs.
STATE AND BASIN RECAP
North Dakota and its Williston basin led the major oil- and gas-producing regions with a 5-unit jump to 35, representing their biggest increase since Aug. 8. 2014.
Texas and Pennsylvania each increased 2 units to 256 and 27, respectively. Texas is up 82 since May 27 while Pennsylvania is up 14 since July 8. In the gas-targeting regions within those states, the Haynesville gained 3 units to 20, up 7 this month, a far cry from the Haynesville back in 2010 when more than 180 rigs were drilling in the play. The Marcellus rose 2 units to 36, up 15 since Aug. 12. The Permian was unchanged at 212.
Wyoming increased a unit to 17. The Cana Woodford was up 2 to 41, up 17 since June 24. Colorado dropped 3 units to 17 and its DJ-Niobrara lost 2 units to 15. New Mexico fell 2 units to 32. The Mississippian declined a unit to 2.
Oklahoma Rig Count – Flat As A Pancake
Oklahoma has recorded 73 rigs for the last 3 consecutive weeks. The HZ count remains at 71 and the number of vertical rigs drilling stay at 2.
Not much change in the rig counts across Oklahoma with Blaine, Grady, Logan and Major Counties each had a plus one gain, while Alfalfa, Canadian, Kingfisher, Lincoln and Payne Counties were each minus one.
Data gathered from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count released on Friday, October 28, 2016.
This week, we take a quick look at the 2016 Oklahoma Rig Count in comparison to the Weekly Cushing, OK WTI Spot Price FOB (Dollars per Barrel) as provided by the EIA.