U.S. rig count down 60% for year, no drilling in Arkansas for 5th straight week

by Wesley Brown (wesbrocomm@gmail.com) 206 views 

Rig operation in Arkansas' Fayetteville Shale Play. (Image from BHP)

The U.S. rig count has continued on its downward path as sliding oil and gas prices have pushed energy companies to suspend drilling operations and furlough work crews and support staff until the commodity markets turn around.

On Friday, there were only 619 drilling rigs in operation across the U.S., down 18 from a week ago and a stunning 924 or 60% decline from last year’s tally of 1,543 in the last week of January, according to Baker Hughes’ weekly count. Of that total, there were 498 rigs drilling for oil and a mere 121 for natural gas.

In Arkansas, there have been zero drilling rigs in operation in 2016. The Arkansas rig count dwindled to one in the last week of December after Fayetteville Shale leader Southwestern Energy announced it was taking its final two rigs offline until natural gas prices turned around. The number of drilling rigs in Arkansas peak at 60 on July 11, 2008, when Fayetteville Shale development was in full swing, Baker Hughes statistics show.

A week ago, Southwestern announced it was laying off around 1,100 workers companywide with 600 of those jobs to cut in Arkansas. The Texas driller has also shaken up its executive ranks after longtime company CEO Steve Mueller resigned and was replaced by industry veteran Bill Way on Jan. 6.

BHP Billiton, the third largest producer in the Arkansas shale play, recently recognized a pre-tax impairment charge of nearly $7.2 billion against the carrying value of its onshore U.S. oil and gas assets in the company’s upcoming financial results. As part of the 2016 capital budget, BHP has allotted only $200 million and $400 million respectively for the dry-gas Fayetteville and Haynesville shale plays, essentially shutting down those developments except for administrative and completion and wellhead production activities.

Together, Southwestern and BHP control a leasehold position of nearly 1.5 million net acres in the Fayetteville Shale. XTO Energy, a subsidiary of U.S. oil giant ExxonMobil, is the second-largest leaseholder in the unconventional Arkansas shale play. Since purchasing XTO Energy for $35 billion in the summer of 2010, ExxonMobil has not released any financial or production data concerning the natural gas driller’s operations in the Arkansas shale.

Despite Arkansas’ drilling woes, it is not the only state where natural gas drilling has been halted or slowed. Nationwide, the number of rotary rigs drilling for gas this week fell by six to 121, down 62% from 319 a year ago. By contrast, there were 1,223 oil rigs in operation across the U.S. a year ago, compared to the 498 still online at the end of this week.

Similarly, the U.S. offshore rig count is 28, down one from last week, and down 21 rigs year over year. Nearly all U.S. offshore oil and gas production takes place in the Gulf of Mexico.

Meanwhile, U.S. oil and international prices are poised to end down more than 9% in the month of January. In Friday’s session on the New York Mercantile Exchange (NYMEX), West Texas Intermediate for March delivery was up 1.57%, or 32 cents at $33.56. Brent crude gained 62 cents, or 1.8% at $34.51 per barrel on London’s ICE Futures exchange.

In a rare positive rally on Friday, forecasts for colder weather in February boosted NYMEX natural gas futures by 10.9 cents to $2.291 per million British thermal units.

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