Moving Past Rig Counts: a Deeper Look at Bakken Rig Activity

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Rig Counts

Did you know…

“Over the last week the Bakken rig count has dropped another 9 rigs from 140 rigs. This is a 6.4% drop off when the US land rig count fell 7% over the same time period.”

or how about…

“Bakken rig count dropped another 47 rigs over the last month. This is a 26% drop off compared to the 20% drop in US land rigs..”

one more…

“Current Bakken rig count has fallen to 131 rigs — down from Christmas Day high of 193 rigs.”

Moving Past Rig Counts: a Deeper Look at Bakken Rig Activity
Image: Bakken Rig Count. December 1st, 2014 through February 23rd, 2015

These are examples of headlines I’ve seen daily for the last 3 months. Before the recent free-fall, blurbs were touting how many rigs were added. Most often different time horizons or geographic extents were contrasted. Occasionally different drilling specs such as horsepower, drilling trajectory, or even primary product would be compared. Even now as rigs are stacked at unprecedented rates, a weekly rig count only serves as a peek into the current state of drilling. Rarely did I come across an analysis that dove deeper.

You might not be surprised as you’re reading this to find out I’m not a journalist. I do want to share what I teased out of our rig dataset in an afternoon. Hopefully it isn’t what you’d see in a typical rig count article.

What a rig can tell us

An unknown proportion of permits result in additional production capacity. The nominal investment of filing a permit can occur over a year before drilling occurs in some cases. Some permits expire and plans never become reality. Not until a rig shows up on site is there any certainty which planned wells make the cutoff. Knowing if a rig is on a permit is an important puzzle piece. It tells you who is investing to transform permits into production.

Moving forward along a well’s timeline, completion, test data, and initial production are reported. The reporting lag varies wildly but can still be months long in the best states. North Dakota well information can be delayed by up to six months when an operator requests confidential status. At the time of writing the North Dakota Department of Mineral Resources lists over 2,200 current confidential wells. Release date falls short of telling you when a well will be completed and ultimately start producing. We’ll take what data we can get when we get it.

Rig movement

As the resolution of rig location gets better, more insight can be inferred and fewer assumptions have to be made. Rigs are moving around for numerous reasons. Some operators minimize down time and thus move rigs as little as possible. Other operators drill wells in order to hold leased land. These two patterns look different but can be hidden when counts are rolled up to a single county. Some lucky few rigs set off on far flung exploration expeditions to vet a hunch. These kinds of dramatic moves can result in a gold rush. Still other rigs may only move on once an agreement expires and the contractor moves onto another client.

Moving Past Rig Counts: a Deeper Look at Bakken Rig Activity
Image: Bakken Rig Count by Core Counties

Overall rig count is down in the Bakken. As seen in Figure 2, the four core counties of the Bakken dwarf the rest of the Bakken. Rigs have gone idle across the Bakken. This graph conceals the rigs sent from outlying counties towards the core and higher grade acreage. Even within counties there has been a shift towards better acreage. When you compare todays rig locations with rigs three months ago you see ⅓ of rigs moving to a higher grade land. One half of rigs moved very small distances or stayed within the same grade. Only ⅙ (if I did my fractions correctly) moved counter intuitively towards a lower grade. This fits with the recent narrative that operators are capitalizing their best acreage while backing away from marginal land and experimental wells.

Moving Past Rig Counts: a Deeper Look at Bakken Rig Activity
Image: Bakken Rig Movement December 23rd, 2014 (YELLOW) January 23rd, 2015 (Red) to February 23rd, 2015 (BLUE)

Operator Stats

Who is left drilling the Bakken? An across the board decrease in drilling activity has left ExxonMobil as the operator with the most active rigs. Out of the top four operators ExxonMobil has been remarkably steady while the other three have shed nearly two dozen rigs. This might be the result of long term driller agreements and not part of a larger strategy.

Moving Past Rig Counts: a Deeper Look at Bakken Rig Activity
Image: Top 15 Bakken Operators most active rigs
Moving Past Rig Counts: a Deeper Look at Bakken Rig Activity

The above figure show the top operators in the Bakken based on active rig count. These proportions act as a proxy for relative investment assuming consistent drilling costs. Within each operator box are the drillers from whom they’re contracting rigs. Like with the top operators, the top drilling contractors have been beaten up over last few months. Again one stands out with steady rig count; Petterson-UTI Drilling still has the same 20 rigs running it did three months ago.

Conclusion

Rig counts as an industry metric is not going away anytime soon. Rig count falls short of telling anything about drilling efficiency or well productivity. Incorporating rig activity into an analysis as another piece of the puzzle is useful. Hopefully I’ve opened the door to mapping drilling locations beyond county resolution because county production varies significantly. The relationship between operators and drilling is important as inevitably winners and losers will emerge. One trend made perfectly clear is that the industry is in a wholly different state it was a year ago.

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Braeden Gilchrist

Braeden Gilchrist is a Oil & Gas Research Analyst at Drillinginfo. He is part of the DI Analytics team that develops data driven insights and tools. His work helps find better operator benchmarking analysis and new visualizations. Braeden earned his Bachelor’s Degree in Mechanical Engineering from The University of Toledo and Master’s Degree in Natural Resources and Environment from The University of Michigan.