The US oil rig count continued to fall this week in response to lower crude prices, although output continues to climb and debate rises on the impact of a backlog of uncompleted wells.
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On Friday, 825 oil rigs were working domestically, down 41 from last week and down 784 from October 10, according to the Baker Hughes weekly rig count. The number of rigs in the Bakken Shale of North Dakota and Montana fell to double-digit levels for the first time in at least four years. Just 99 rigs were drilling in the play, down from 104 the week before and the most-recent high of 198 October 3.
Operators have quickly reined in activity there, because of the high cost of wells and transportation to markets from the stranded basin.
Likewise, oil rigs drilling the Permian Basin of West Texas and New Mexico dropped by 20 to 285 this week, down from 562 November 14.
Meanwhile, analysts debated the impact of a current phenomenon known as "fracklogging" on production later this year -- the recent backlog of drilled, but uncompleted, industry wells that operators do not want to produce at current low oil prices. NYMEX front-month crude settled at $45.72/barrel Friday, up $1.76 day on day, but down from $107.26/b from June 20.
As rig counts continued in free fall, one analyst claimed a "fracklog" exists of over 1,400 wells.
The phenomenon of hoarding wells in the current low-oil-price period "seems real," FBR analyst Thomas Curran, said in an investor note earlier this week. The investment bank's exploration and production team did the fracking backlog count, he said, adding that other analysts have calculated even higher numbers.
Curran credited oilfield service consultants Spears & Associates with an estimate of a 2,000 wells fracklogged over the first quarter.
Well backlogs have sparked some concern that holding back completions until oil prices rise would simply cause a production surge in the future, causing crude prices to plunge once again.
The US Energy Information Administration reported this week that US output averaged 9.419 million b/d for the week ending March 13, up 544,000 b/d since the beginning of October, before rig counts began dropping.
Curran and other analysts acknowledged the difficulty of sorting out just how many wells have been deliberately banked and delayed because of low oil prices, and how many constitute a normal backlog of jobs stemming from a lag in the unconventional drilling and completion process.
EOG Resources, Anadarko Petroleum, Continental Resources and Chesapeake Energy are some of the most prominent operators that frankly signaled their intention in recent quarterly conference calls to deliberately build a bank of uncompleted wells that would be brought online when oil prices rise.
For example, EOG sees a backlog of about 350 wells this year and Anadarko sees one o f 125 wells. Continental said it had deferred completions in the Bakken by 25% in Q1, while Chesapeake will have about 100 wells in its Eagle Ford Shale inventory.
Several other companies, large and small, gave less-definite numbers but also said they were prepared to bank wells.
On the other hand, investment research firm Bernstein Energy's Bob Brackett believes the incremental number of strategically uncompleted wells represent "a small portion of the total," he said.
Brackett's research concluded that of 22 large E&Ps surveyed that account for 40% of US liquids production, wells listed as "in progress" totaled about 30% of wells typically completed in a year. But that number was only slightly higher -- perhaps only 3% collectively -- in 2014 than in the prior year.
Brackett also noted that completions account for around 70% of the total cost of a shale well, suggesting that operators would be disciplined even when bringing them online.
"Even though there is an inventory of wells, it is not clear that they would all come online at a moment's notice as 'bears' fear, as they would still cost several million dollars each," he said.