The US drilling rig count plunged 30 units to 541 during the week ended Feb. 12, continuing another interval of steep declines amid a drilling slump that stretches back to late 2014. All but two units to go offline this week were oil-directed. The count last week dived 48 units, the largest in nearly 11 months (OGJ Online, Feb. 5, 2016). The latest data from Baker Hughes Inc. show the count is down 817 year-over-year and at its lowest point since May 28, 1999. The nadir of the 1998-99 downturn was 488 units on Apr. 23, 1999. With the lingering presence of $30/bbl-and-less oil, the industry has started the year further cutting average 2016 Brent and West Texas Intermediate prices, capital expenditures, and thus exploration and production activity (OGJ Online, Feb. 8, 2016).
In light of the recent declines, financial services firm Raymond James & Associates Inc. further reduced its forecast US rig counts for 2016-18 in its most recent industry brief. RJA now projects an average 2016 count of 500, down from the 620 the firm projected just last month and down nearly half compared with the 2015 average (OGJ Online, Jan. 8, 2016). The new bottom is expected occur in April at 400 units, compared with RJA’s previous projection of 550 in June. A drilling rebound isn’t seen until late 2016, the firm says, as many E&P firms are likely to first focus on drawing down their uncompleted well inventories and improving their balance sheets, while waiting for consistently higher crude oil prices and a labor force recovery.