Friday, June 24, 2011

June 2011 Drill Rig Census:
New Record High in PA — 112

Pennsylvania quietly broke another drilling record as of the final full weekend of June 2011 — 112 rotary rigs actively drilling in-state on average for the month, according to the most conservative of the rig counts.

These stats were released at noon central time today (as they are every Friday) by oil field service behemoth Baker Hughes — and yet a Google News check at this hour (it's now about 9 p.m. eastern time) shows not a single Northeastern media outlet has taken notice of this essential, ongoing story.

Pennsylvania's June 2011 rig count appears to mark a continuation of a 29-month-old trend that has consistently run even or upward, except for an apparent Mud Season hitch early in 2011.

Other Appalachian states, during the same period, have not showed much shale gas or shale oil uptick by comparison:  West Virginia had 20 rotary rigs on hand, Ohio was host to 10 of them, and New York 0 — count 'em, 0!

Online records going back as far as 1987 show the oil and gas industry has never in modern times been so busy in the Keystone State — a rush that's mostly tied to a boom in horizontal drilling and hydraulic fracturing to produce natural gas from Marcellus shale.  The now-two-and-a-half-year-old push in Pennsylvania is widely attributed to strategic, long-term desires to maintain thousands of leasehold acres — rather than have to purchase these all over again, due to expiration, due to inactivity. 

Despite pretty terrible market values for natural gas of late — with futures still trading at industry-cheating, landowner-cheating, and grandchild-cheating prices of between $4 and $5 per MMBTU — national rotary rig numbers have continued on a non-stop upward trend.  Some of that is due to oil work, which has started to steal some investment from natgas.  But, overall, the rig numbers keep insistently going higher:  In the U.S., there were 1,863 rigs working on average in June a number which has been consistently increasing for two years straight, since June 2009.

In terms of Appalachian shale gas, West Virginia, Ohio, and New York are also touted as holding resources similar to Pennsylvania's — particularly in sometimes overlapping layers known as the Marcellus, the deeper Utica, or the shallower Upper Devonian.  However — in factual defiance of significant media hype, especially quite a bit of ink lately in the eastern part of the Buckeye State — shale gas (or shale oil) development still doesn't seem to be yet showing much definitive uptick in West Virginia or Ohio.

And New York, so sorry to say, has since July 23, 2008 voluntarily put itself under various administrative freezes on any full-scale Marcellus or Utica drilling permits — pending still-ongoing study of the environmental impacts, and the crafting of reportedly tougher rules. 

The chart above runs the data back to October 2004, the month when Range Resources quietly became the first driller in the Appalachian basin to stimulate a horizontal Marcellus well by pumping, under high pressure, a mixture of water, sand, and chemicals into the shalebed.  Word of Range's surprisingly successful gas-finding results on this and follow-up wells did not get out widely until January 2008, when geologists Terry Engelder of Penn State and Gary Lash of SUNY Fredonia released a significant re-estimation of the natural gas content of the Marcellus formation.

Over this time frame of the Marcellus shale revolution, the Baker Hughes rig counts are useful in offering a historical comparison of industry's boom or bust response to the varying economic times, geologic fortunes, and regulatory receptions posed by each of these four states.  Drilling in Pennsylvania has nearly without exception been running even or higher every successive month since January 2009, for instance, but in New York, industry's interest in developing landowners' shale gas has been met with a regulatory holdup and a political firestorm.  

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 

Baker Hughes has long kept a tally of active drilling rigs for both informational and promotional purposes.  The counts trace their history to 1944, when they were initiated by predecessor Hughes Tool Company (whose founder Howard Hughes, Sr. invented the two-cone rotary drill bit). The Hughes company realized that its sales force generally knew (or could find out) the location by state or province of every single operating rotary rig in the United States or Canada — even those which weren't (yet) using Hughes tools.

The counts have been consistently maintained ever since, and they have become a barometer for the energy sector, and for the economy generally.

Baker Hughes' rig counts are considered more conservative than those broadcast by other outlets, because they only count active, rotary rigs — highly complex operations which are in the midst of placing substantial economic demands on the service, support, and labor sectors.

Rigs are only counted as active if they are being employed anywhere along the line between "spudding in" (or starting a well) and "target depth."  Not counted are rigs that are in the process of being taken down, moved, or rigged up again, or rigs that are being used to support non-drilling chores, such as workovers, completions, or testing. Most relatively small, cable-tool and truck-mounted setups are also excluded from the census.

No comments: