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Permian basin takes the biggest hit as number of drilling rigs in US drops

The number of rigs working in the US dropped over the second quarter, with the prolific Permian basin of Texas and New Mexico taking the biggest losses, writes Caroline Evans.

Overall, the US rig count dipped by three to 1091 quarter-on-quarter, but the metric swung as low as 1050 during the period, data from oilfield services firm Baker Hughes show.

The data illustrate how operators have scaled back activity in shale basins as investors continue to favour free cash flow over growth.

The Permian has also suffered its own special set of problems including crushingly low local commodity prices amid limited takeaway capacity. Over the course of the second quarter, the Permian rig count fell by 13 to 441, and the number of rigs working in the US' largest onshore oilfield has fallen nearly 10% from 487 at the beginning of the year.

Elsewhere, the Marcellus shale of the north-east US and the Eagle Ford shale of Texas each lost seven rigs, according to the Baker Hughes data.

Only two plays in the whole US had more rigs working in the second quarter versus the first — the Ardmore Woodford of Oklahoma, which added one for six, and the Utica shale of the north-east US, which added two for 17.

Despite the uptick in the Ardmore Woodford rig count, rig activity in Oklahoma has dropped by 26% year-on-year, according to figures from DrillingInfo. In addition, the number of drilled uncompleted wells in the state has increased from 25 in the third quarter of 2018 to 261 in the second quarter of 2019.

"While some of those will be completed, or are in the process of being completed, that is still a substantial increase for the short time," DrillingInfo said.

Tudor Pickering Holt noted that smaller independent exploration and production companies have driven the bulk of second-quarter decline and have seen their rig counts drop 11% quarter-on-quarter, while "large-cap" operators have also cut their rigs by 8%.

"On the other hand, integrateds continue to add activity (up 8% quarter-on-quarter)," it added.

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