The Covid-19 pandemic has caused the largest horizontal rig count collapse ever recorded in the US, a Rystad Energy analysis of Baker Hughes data shows. The total horizontal oil rig count fell below 270 rigs last week, a 57% decline from the peak of 624 rigs seen in the middle of March 2020. Horizontal gas drilling was down to 70 rigs last week, which is 54% below the previous peak seen in June 2019.
The magnitude of the decline in horizontal oil drilling makes this downturn even more unique, compared to the previous downturn of 2015-2016, where declines all the way from the peak to the trough reached around 53% to 54%.
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While we have not reached the bottom yet, we have most likely passed the peak pace of decline, both in absolute and percentage terms. After several weeks of observing a decrease of 50-55 rigs per week, the oil rig count was down by only 32 rigs last week. On a two-week basis, a 23.4% fall was recorded last week – certainly moderate in comparison to the peak two-week decline level of 25.6% seen the week before.
“The oil price crisis and the impact of Covid-19 has resulted in the most dramatic collapse of the US Land rig market in history. There are two key trends around basin mix; the share of Permian increased in terms of total horizontal oil drilling from around 62% to about 73%, while the share of gas in total horizontal drilling increased from 12% to 21%. We anticipate that both of these shares will continue to climb in the next few weeks.,” says Artem Abramov, Rystad Energy’s Head of Shale Research.