Rig counts, a metric used to gauge exploration and production, were mixed last month, with U.S. land numbers down and offshore up, a market survey found.
Commodity pricing group S&P Global Platts said in an emailed report it counted 988 rigs working inland in the United States in December, down about 3 percent from November, but up 47 percent from the same time last year.
Exploration and production trends waned as the market hit rock bottom with a price for crude oil below $30 per barrel in early 2016. Fast forward to December, and prices were holding firm to the $60 range. In the first week of 2018, the price for Brent crude oil, the global benchmark, was making a run at $70 per barrel.
The total rig count for December was down 2 percent from November and Platts found most of the pullback actually came from shallow-water conventional wells.
“The fact that horizontal drilling [used in inland shale] continued at a stable pace over the holidays suggests that underlying prices of oil and gas are at levels that will likely cause the overall U.S. rig count to climb during 2018,” Platts Senior Industry Analyst Trey Cowan said.
Offshore, denoted as all inland waters plus the Gulf of Mexico, showed an 11 percent increase in rigs from November and an 11 percent increase from December 2016.
Analysis from consultant group Wood Mackenzie said the deep waters of the Atlantic basins like Guyana and the U.S. Gulf of Mexico are the “sweet spots” for big oil companies this year. That’s where commercialization will be quick and most companies can break even with a price of oil below $50 per barrel.
The U.S. Gulf of Mexico accounts for about 17 percent of U.S. oil production and 5 percent of the natural gas. Inland shale, meanwhile, could push total U.S. oil production toward a record 10 million barrels per day this year.
William Turner, a senior analyst for a report published by Wood Mackenzie, said it could be a record-setting year in the Gulf of Mexico as well, where production could make a run at 2 million barrels per day.
“Although deepwater Gulf of Mexico has taken quite a beating over the last three years, the industry has clawed its way back to being competitive by significantly cutting costs, improving efficiencies and tightening up the supply chain,” he said.
By Daniel J. Graeber