Why is the US Land Rig Count and Drilling Activity so Low at $80 Oil?
Many are asking what is going on in the US Land market.
Oil is $80, but drilling activity remains low. When will the rig count and drilling activity increase?
The reason drilling activity and rig count are low is that now, additional levels of drilling and rig count are not needed for operators to meet their production commitments. This is due to increased drilling, completion & production intensity, and efficiencies allowing operators to “accomplish more with less”.
As a result, US Land is producing record levels of oil with a historically low rig count. As observed with the EIA data below, US Land had over 4,000 drilling rigs operating in 1981 at a lower level of production. Fast forward to today and we are producing historic levels of oil with a fraction of the number of rigs running.
Oilfield service suppliers and operators have demonstrated grit, tenacity, and innovation which have
driven drilling, completion & production intensity, and efficiencies to new heights.
US land operators report drilling wells in 2.7% fewer days and completing wells in 3.2% fewer days, although lateral lengths and stage count continue to creep higher.
Drilling and completion intensity & efficiency are even more pronounced in the Permian Basin where operators report drilling wells in 4.2% fewer days and are completing wells in 7.1% fewer days. Operators are leveraging technologies such as simultaneous hydraulic fracturing, EPRVs, top-fill and management systems, and other advancements that, in aggregate, allow operators to drill and complete more efficiently.
In addition, US Land operators are using larger ESPs to maximize production levels and leveraging ESPs for extended service intervals. The result is higher levels of production with a lower number of wells drilled. Rig count, however, will need to increase in 2024 to meet targets.
While we may not know today what the next breakthrough will be, you can rest assured that the US land oil & gas industry will play a major role in making that next breakthrough possible.
Kimberlite will continue to track industry trends & technology adoption including the growing use of dissolvable plugs, simultaneous hydraulic fracturing, use of recycled water, wet sand, and other technologies. Feel free to reach out to discuss.