The oil rig count in the United States has dropped by a further 10 week-on-week, as operators continue to highgrade their acreage, and retrench to their core positions in a drive to focus capital within highest returning assets.
The Mid-Continent provides the best example this week. Oklahoma saw one of the steepest drops in activity, but it is the location of the activity which matters. We saw rigs pull back from the Miss Lime, which continues a long trend of declining activity, while the core SCOOP & STACK remained flat week-on-week; gas rig activity also remained constant.
A similar pattern can be seen in the Bakken around the Nesson Anticline. Rigs were added to core assets, with the Nesson Anticline and Fort Berthold sub-plays both experiencing an increase in rigs, as operators moved in from the fringe areas of Dunn County.
This decline in fringe drilling is not new. There were virtually zero exploratory rigs active for a total of ten weeks since November 2014, and operators have seen remaining well inventories fall because of it. The weak exploration activity and well inventory declines are not necessarily a source of critical concern for operators; it shows a measured response to the low price environment.
We expect rigs to continue declining until mid-2016, bottoming at just under 700 rigs.
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