The number of active rigs drilling for oil and gas fell by their most in two months, according to the latest data from oil services firm Baker Hughes. There were 19 oil rigs that were removed from operation as of Oct. 17, compared to the prior week. There are now 1,590 active oil rigs, the lowest level in six weeks.
“Unless there’s a significant reversal in oil prices, we’re going to see continued declines in the rig count, especially those drilling for oil,” James Williams, president of WTRG Economics, told Fuel Fix in an interview. “We could easily see the oil rig count down 100 by the end of the year, or more.”
Recommended: Six ways fleet operators save on gas (and you can, too)
Baker Hughes CEO Martin Craighead predicted that U.S. drilling companies could begin to seriously start removing rigs from operation if prices drop to around $75 per barrel. Some of the more expensive shale regions will not be profitable at current prices. For example, the pricey Tuscaloosa shale in Louisiana breaks even at about $92 per barrel. (Related: How And When Will Saudi Arabia Respond To Low Oil Prices?)
Six ways fleet operators save on gas (and you can, too)
PHOTOS OF THE DAY Photos of the day 10/22
But that also reflects the high costs of starting up a nascent shale region.
Much of the shale basins that are principally responsible for America’s oil production will not feel the effects of low prices as quickly as many are predicting.
Better-known shale formations, such as the Eagle Ford in South Texas, can break even at much lower prices. That’s because exploration companies have become familiar with the geology and fine-tuned drilling techniques to specific areas.
Productivity gains have allowed drillers to extract more oil for each rig it has in operation. For example, in North Dakota’s prolific Bakken formation, an average rig is producing over 530 barrels per day from a new well in October. Less than two years ago, that figure sat at around 300 barrels per day. Extracting more barrels from the same operation improves the economics of drilling, which means shale producers are not as vulnerable to lower prices as they used to be.