Horizontal activity in US liquids basins has so far been evolving into a depressed slump in 2019, or at least this is the case when looking at one of the most common activity metric: rig counts. While the total number of active rigs varies among different sources, there is a strong consensus that the overall trend in the first eight months of 2019 experienced a systematic and continuous decline. The total horizontal rig count in major liquids basins declined by 16%, but really the data has a wide spectrum: Delaware New Mexico has displayed resiliency to the downward trend, whereas Oklahoma basins have dropped more than 50% since late 2018.
If we look at the Baker Hughes rig count using Rystad Energy basin assumptions, we see that horizontal oil drilling in major liquid basins (Bakken, Eagle Ford, Niobrara, Permian) declined by 16% between January and early September 2019. The pace of decline has been quite stable recently, averaging 3 rigs per week.
Looking at the trends by basin, outside of the Permian, we observe that all major liquid basins experienced steep changes in the level of horizontal rig activity, but SCOOP & STACK really stand out in terms of the magnitude of decline. In fact, SCOOP & STACK lost almost 60 horizontal rigs (50%) from the level seen in late 2018. This is almost half of all rig count reductions among all considered plays.
When it comes to the Permian Basin, Delaware TX and Midland sub-basins also saw some rig count reductions in 2019, while Delaware New Mexico is the only part of the Permian with full resiliency in horizontal rig activity. In fact, Delaware New Mexico has been recently testing new all-time high rig activity level at above 100 active rigs.
While rig counts shifted down, we still observe full resiliency in well count metrics. This is the case for both spudded and completed (first oil) wells. It is largely the Permian Basin which explains the resiliency in total liquid well counts as the increase in basin-wide activity compensates for reductions in other major liquid plays. Yet the robustness of well counts and continuous efficiency gains reflected by an increased number of wells per rig are fascinating.
The significance of the resilient activity level is further exemplified by record-high completion intensity and well complexity. As both average perforated lateral length and proppant use per well keep trending upwards in 2019, US onshore liquids basins exhibit new records in total completed lateral footage and total proppant consumption every 3-4 months. Permian Basin alone had a record 30.7 million tons of proppant pumped downhole in the first seven months of 2019. This corresponds to 27.5% from the same period of 2018. Hence, the demand side of the equation still looks quite favorable for operators and service providers in US land. Yet will proppant and pressure pumping segments be able to overcome the challenges associated with excessive supply additions? Read more about this in our latest ShaleIntel reports.