Comparison of Shale Play Activity Based on Rig Counts

(From Will Brackett’s article in the Powell Barnett Shale Newsletter August 2, 2010 issue. Information from RigData’s biweekly publication, The Unconventional Drilling Report)

Analyzing the information from The Unconventional Drilling Report shows that the rig count in most major shale plays has been pretty much flat over at least the past six to eight weeks. The exceptions to this have been the Marcellus Shale in Pennsylvania, and in the Eagle Ford Shale in South Texas.

Marcellus rig counts have risen from an average of just over 30 in the third quarter of 2009 to the 80’s by May and 101 by July 23. The increase is occurring in Pennsylvania while West Virginia remains flat.

Baker Hughes Major State Rig Counts, July 30, 2010

Bradford County is the leader in the state in both active rigs (21) and drilling permits (26) as of July 23. Furthermore, when adding in Susquehanna (13), Tioga (8), and Lycoming (6) – these four Northeast Pennsylvania counties represent almost half of all the active rigs in the state (48 out of 101) and 50 out of 99 drilling permits. The Southwest Pennsylvania counties of Washington (13), Greene (9), and Fayette (5) represent another 27 rigs and 9 permits. Therefore, these seven counties account for 75 out of 101 active rigs and 59 out of 99 drilling permits.

RigData Marcellus Shale Overview as of 7/23/10

The Haynesville Shale saw a steep climb in the rig count before leveling off around 180 in June. The Unconventional Drilling Report notes that this seems to be a reasonable level given much of the drilling activity in the play is for leasehold retention amid continued weak natural gas prices. Haynesville activity in the core area in Louisiana is heavily concentrated in just two parishes – De Soto with 59 of the 124 rigs in Louisiana and 11 of the 25 drilling permits; and Red River with 27 rigs. Activity in the non-core area is mostly focused in Sabine, with 11 rigs.

Activity in East Texas is more evenly distributed, with 51 of the 56 rigs being located in San Augustine (12), Harrison (11), Shelby (10), Nacogdoches (9), and Panola (9).

As previously mentioned, the liquids-rich nature of the Eagle Ford is propelling the emerging play forward, to the point that the count has jumped in July going from 65 on the 9th to 84 by the 23rd. The jump is significant in that as of the 23rd, the Eagle Ford’s count of 84 surpassed the venerable Barnett which had 81.

Much of the activity in the Eagle Ford is oil wells, which make up almost 60 percent of the wells being drilled in the play on July 23. As of that date, activity in the Eagle Ford was mostly concentrated in four counties: Webb (22), La Salle (12), Dimmit (10), and De Witt (10), which together account for 54 of the 84 active rigs. Permit activity for the Eagle Ford shows drilling activity is likely to increase in McMullen and Live Oak counties in the near future.

The Unconventional Drilling Report notes that a prolonged slowdown for the Fayetteville Shale looks more likely, with the rig count flattening and then declining slightly while permit levels have fallen to about a third of where they used to be. The Woodford has also remained flat while the all-oil Bakken has settled into a robust range of roughly between 107 and 111 over the past month or so.

The chart below shows the trends in the rig counts for all the major shale plays from the third quarter of 2009 to July 23, 2010. Note the flattening in most of the shale plays with the exceptions of the Marcellus and Eagle Ford.