US DRILLING will drop 65% this year with the horizontal rig about to fall steeply from high mid-March levels of 620 to 200.

 

"Most of the anticipated decline will come by the end of April. The horizontal rig count has so far dropped to roughly 500, falling by 19% from the recent apogee just three weeks ago," consultancy Rystad Energy said. 

 

 

"This is for sure a much faster industry reaction than during the previous US land rig down cycles, and we will likely see continuous downward adjustments of similar magnitude throughout the next couple of months," US shale analyst Artem Abramov said. 

 

It said the declines are happening across the US including the Scoop and Stack areas, home to  ASX-listed Brookside Energy, where there are now only 20 horizontal rigs in a first for industry.

 

Across the way in the Eagle Ford 25% of rigs are already gone, dragging drilling back to 2017 levels; however, the Bakken Shale is more robust in relative terms at 40 rigs but levels are also at 2017 levels.

 

Permian Basin horizontal drilling is also declining in all core sub-basins; however, the rig activity in the oil-rich parts of the Permian like Delaware, New Mexico  and Midland North hasn't hit multi-year lows, it said.

 

Activity in gas-focussed basins is down at early 2017 levels.

 

"This downturn is the real test of US industry endurance," he said. 

 

However separate research from the consultancy suggests a silver lining in the Permian: less flaring.

 

Flaring fell to 700 million cubic feet per day in the first quarter of the year which it said is the lowest since the third quarter of 2018.

 

At its highest point it was some 850MMcfpd in the Permian and over 1Bcfpd across the US. 

 

Of that figure 550MMcfpd was flared at the wellhead, where over 70% of flaring typically occurs. Rystad expects this figure to drop to 330MMcpfd by the end of the year.

 

For reference Rystad suggested Permian flaring generated on average 10 kilograms to 12kg of CO2 equivalent per barrel of oil produced, which has dropped to between 8kg-9kg and will fall to 5kg-6kg, indicating flaring isn't just dropping in line with oil production.

 

Newer wells tend to flare more gas more often and these are the first to be shut in, the Norway-headquartered consultancy said. 

 

"The-basin wide wellhead flaring ratio fell below 3.5% in the first quarter of 2020, and additional improvements are expected to materialise throughout the remainder of 2020," Abramov said.

 

"This is especially true now, in this period of collapsing basin-wide completion activity amid an oil price crash and prolonged price weakness."