EERC drops sharply

EnerCom has released its latest Effective Rig Count, linking the state of drilling activity and the reported production from the major shale basins.

The Effective Rig Count dropped by 83 in December, meaning the Effective Rig Count now stands at 2,762. This means that the new production in December would have required 2,762 rigs from January 2014 to achieve. While this is an impressive figure, it is the lowest Effective Rig Count seen in the U.S since May 2018.

While the number of rigs active in major shale basins declined by five in December, most of the decline in EERC is due to declining efficiencies. Per-rig efficiencies dropped sharply in December, showing the largest drop since April 2017.

This decline is likely due to a drop in completions activity, and was present in multiple basins. Efficiencies were flat in the Niobrara and Anadarko and they declined slightly in the Bakken. The largest drops, however, came in the largest oil and gas producing basins in the country. Both the Permian and Appalachian saw efficiencies drop sharply in December. The Permian decline is easy to explain, as several companies operating in the play considered or implemented a frac holiday in late 2018. Idling completions operations while continuing drilling would produce the sudden decline in per-rig efficiencies that was seen. Major companies did not indicate plans for a frac holiday in the Appalachian, but such a program is likely, as per-rig efficiencies dropped drastically in that basin.

The decline in efficiencies translated through to production figures, as growth slowed in the Permian and Appalachia. Forecasts show the major shale basins will grow by a combined 62 MBOPD from January to February, with the Permian contributing only 23 MBOPD. This is the lowest growth seen in the basin since May. For reference, the Permian alone has grown more than the overall 62 MBOPD five times in the last year.

Growth in gas production also slowed, as the U.S. is forecasted to add 849 MMcf/d from January to February. This is the lowest growth since April, though with February output of 77.6 Bcf/d, the major shale basins are rapidly approaching the 80 Bcf/d milestone.

By Richard Rostad, analyst, Oil & Gas 360


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