The Baker Hughes weekly rig count total showed a small increase of six total rigs exploring for oil and gas Friday, led by an increase of three rigs in the Williston basin. Surprising areas of increase this week led to a net increase while many areas that have seen recent activity showed either losses or no increase at all.
While North Dakota, which makes up the majority of the Bakken formation, was up three, California and Louisiana also each saw one additional rig. Alaska, Colorado, and New Mexico added two new rigs each.
Texas, which has typically been one of the major hot spots for new E & P, was stagnant, with no gains nor losses. Oklahoma was down four rigs exploring for oil and gas, and Wyoming also lost one rig.
Here is the breakout by basin according to Baker Hughes:
|Major Basin Variances||This Week||+/-|
Rig decreases and lower oil prices
Reuters analyst John Kemp noted last week that “shale producers and OPEC are now on a collision course” as OPEC attempts to continue its production cuts in an attempt to repair rock-bottom oil prices. At the same time, shale producers continue adding rigs to boost output and cut into OPEC’s market share. However, this might result in a nightmare for shale producers here at home. Kemp says:
The contradiction will likely be resolved through a drop in oil prices to rein in shale growth.
With oil prices already beginning to slip, a slowdown in production may follow. Kemp also reminds us that the rig count typically lags 15-20 weeks behind changes in oil prices, and it won’t be surprising if the steady increase in the rig count begins to slow, or even slip back down the opposite direction. We will have to wait and see if Kemp’s analysis rings true in the upcoming weeks and especially into fall.