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Rig counts in the United States have been falling at record rates since the beginning of December as the price of oil remains too low for many producers to make a profit. Rig counts are likely to stay down until global over-supply is reduced, but it could take some time before fewer rigs begins to translate into lower production.

At the time of this article’s writing, WTI is at $52.09 and Brent is at $60.83, posting gains this week. Significantly lower oil prices caused by OPEC’s decision to maintain production in the face of stagnating glob...

360 Commentary

EnerCom 02.13.2015

While the rig count has been declining extremely fast since December, it is not a surprising development. Our models show that the greatest stress in this low price environment will be on oil plays, which is where we are seeing the rig counts fall the fastest. Based on our models, operational costs would have to fall 41%, 52% and 66% respectively in the Permian, Eagle Ford and Bakken in order for those plays to remain economical at $50 per barrel oil and $3.50/mmBtu gas. What we are seeing is a rational reaction from operators to lower costs as the price of oil remains low.  


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