Baker Hughes US rig counts keep falling as domestic output poised to flatten

Houston (Platts)--17Apr2015/949 pm EDT/149 GMT

US rig counts continued to fall this week, although the pace of the decline has slowed, Baker Hughes data showed Friday, in the wake of other figures showing production growth is easing.

During the week ended April 17, 734 oil rigs were active in the US, down 26 from last week, while the total rig count fell by 34 to 954.

The size of weekly rig count declines, which mounted since December in response to a 50% drop in oil prices from mid-2014 peaks of $107/barrel, has lessened in recent weeks, the data showed.

"Over the last month, the average weekly rig count drop has slowed to around 30 rigs/week from roughly 70/week in the preceding two months," RBC Capital Markets analyst Kurt Hallead said in an investor note Friday.

As the rig count nears a 50% peak-to-trough move, "we think weekly declines continue to decelerate," Hallead said.

Oil rigs have dropped 54% from the Q4 peak of 1,609.

Among specific shale basins, the Mississippi Lime play in Oklahoma and Kansas showed the largest single rig drop this week, falling to 31 rigs. The region saw tornadoes and flooding in the last couple of days.

Five oil rigs were dropped in the Williston Basin of North Dakota and Montana, and Permian Basin of West Texas and New Mexico, with the total rigs in those regions falling to 84 and 255, respectively.

Meanwhile, signs of flattening domestic output growth have continued to sprout.

The US Energy Information Administration's monthly Drilling Productivity Report on Monday estimated net production from the seven largest domestic shale oil plays will fall by 57,000 b/d in May to about 5,561,000 b/d.

That is the first time in the 18-month history of the DPR to show an overall net output decline.

EIA had projected net declines in April for the Bakken Shale, the Eagle Ford Shale in South Texas and the Niobrara Shale in Colorado and Wyoming, and those declines steepened in the agency's May forecast.

Of the four largely oil basins, the Permian alone remains on track for net growth in April and May, EIA predicted.

EIA also this week showed US oil production on a four-week moving average at 9.399 million b/d as of the week ended April 10, down from 9.408 million b/d the prior week.

Meanwhile, oil production in North Dakota fell for the second consecutive month in February, the state's Department of Mineral Resources said Tuesday.

The state's crude output declined 14,000 b/d to 1.177 million b/d, down a total of 50,000 b/d since hitting its peak in December.

James West, an analyst at investment bank Evercore ISI, said US production has flattened and will likely fall around mid-year.

As for the rig count, "I still think we'll bottom this quarter, towards the end of the quarter," West said in an email. "We'll then be flattish through year-end."

--Starr Spencer, starr.spencer@platts.com
--Edited by Kevin Saville, kevin.saville@platts.com

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