Arkansas severance tax revenue down 38.6%, U.S. rig counts hit historic low

Arkansas’ rig count remained at zero from January through March as the oil and gas industry continue to shed jobs across the board. In February, severance tax revenue fell to the lowest level in fiscal 2016 as the tax collected on marketed natural gas sales fell to $1.96 million, down 38.6% compared to the same period in fiscal 2015.

Since the beginning of the fiscal year that began July 1, 2015, severance tax collections for natural gas in Arkansas for the first eight months are down nearly 53% to $24.9 million, compared to $53.2 million for the same period a month ago, monthly tax data compiled by the Revenue Division of the Arkansas Department of Finance & Administration shows.

At the end of the second quarter, or the three-month period ended Dec. 31, severance tax revenue collected on marketed natural gas sales fell to only $9.98 million, down 50.1% compared to $19.98 million in the same period in fiscal 2015.

RIG COUNTS, BANKRUPTCIES
One of the big takeaways at the end of the first quarter was that natural gas futures have quietly plummeted to levels not seen in this century and are pushing many companies in the energy sector closer to bankruptcy every day, industry experts say.

According to the Haynes and Boone Oil Patch Bankruptcy Monitor, 51 North American oil and gas producers have filed for bankruptcy since the beginning of 2015. These bankruptcies, including Chapter 7, Chapter 11, Chapter 15, and Canadian cases, involve approximately $17.39 billion in cumulative secured and unsecured debt.

As of March 7, 2016, nine producers have filed bankruptcy so far this year. All indications suggest many more producer bankruptcy filings will occur during 2016. Those bankruptcies are also reflected in the U.S. rig count, which also 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.

Although no Arkansas oil and gas companies have hit the skids, the state’s 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 peaked at 60 on July 11, 2008, when Fayetteville Shale development was in full swing, Baker Hughes statistics show.

As of March 18 there were a mere 476 drilling rigs in operation across the U.S., down four from the previous week, according to Baker Hughes weekly rig count. Of that total, the number oil rigs rose by one to 387, while natural gas rigs fell by five to 89.

Overall, Baker Hughes reported that the number of U.S. oil and gas rigs is down 593 rigs from 1,069 during the same period of 2015. The U.S. offshore rig count is 27, unchanged from last week, and down 10 rigs year over year.

Rig County by State (Top Ten, as of March 18)
Texas: 215
Oklahoma: 67
Louisiana: 49
North Dakota: 32
Pennsylvania: 19
Colorado: 17
New Mexico: 15
Alaska: 12
West Virginia: 12
Ohio: 11
Wyoming: 9
Kansas: 9
Arkansas: 0