For the week ended March 6, 2015, the Baker Hughes U.S. rig count fell another 75 rigs to 1,192 units, which was 600 rigs (33.5%) lower than on March 6, 2014. The Canadian rig count was down 30 to 300 rigs (48.9% lower than on March 6, 2014), adding to the gloom in the oil and gas industry.

However, there was one bright spot—the international rig count for February 2015 was up by 17 to 1,275 rigs, 66 fewer rigs than in February 2014.

On Feb. 23, 2015, Bill Herbert and James Bookout in a Simmons Research report pointed out that “year-to-date, the U.S. land rig count has contracted by 526 rigs or about 66 rigs per week (oil rig count is down 477 rigs or about 60 rigs per week). In 2009 the weekly pace of contraction in [the first quarter] was 50 rigs per week.”

The U.S. land rig count is down 35% to 40% from the recent fourth-quarter peak with the horizontal rig count down 25% to 30% from the recent peak. “In effect, we are witnessing a pulling forward of E&P capital-spending cuts, rig-count reductions and oil-service-pricing concessions,” the authors said.

“It stands to reason that the faster, harder, deeper implosion in E&P capital spending will result in a faster, harder deceleration in U.S. production growth and a sharper, faster recovery in upstream capital formation, E&P capital spending, drilling activity and production recovery,” they continued.

That would be very good news indeed. Many of the larger onshore and offshore drilling contractors wrote off many of their older assets in the fourth quarter. Rigs are being stacked and day rates renegotiated. However, the longer the price of WTI crude oil stays around $50, the more operators will be able to adjust capex budgets and put rigs back to work.

Several offshore rig contractors have been able to sign contracts for work internationally. Ocean Rig’s semisubmersible Eirik Raude started a six-well program offshore Falkland Islands for Falkland Oil & Gas. The first well will be on the Zebedee prospect.

Maersk Drilling signed contracts for two rigs recently. The Maersk Venturer was hired by Otto Energy Philippines to drill the Hawkeye-1 exploration well offshore in SC55. As part of a farm-in agreement with Red Emperor Resources NL for a 15% interest, Otto contracted the rig.

The second rig is the Maersk Voyager, which was delivered from the shipyard on Feb. 6, 2015. The ultradeepwater drillship will work for Eni Ghana E&P Ltd. on the Offshore Cape Three Points project under a 3.5-year contract with estimated revenue of $545 million. The contract is expected to start in July.

Bright spots are always good indicators of where to find oil and gas.

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