Friday, November 19, 2010

"Where Have All the Rigs Gone?" Asks Red River Parish

Perusing the declining rig count in Louisiana, it is pretty easy to tell from where the rigs are disappearing: Red River Parish.  Over the course of two months, from September 17 to November 19, 2010, the rig count dropped by 22, from 32 to 10.  Over that same period, the total Haynesville rigs in Louisiana dropped by 15, from 130 to 115 (the peak was July 30 at 136).

What's changed?  Looking at the operators, the big change is that EnCana moved 13 of its 16 rigs out of the parish. That trend somewhat mimics EnCana's Haynesville rig count over the same two month period, which has dropped by ten, from 26 to 16.

EnCana has been keen to note to investors that it will not drill at any cost.  Because of high completion costs and low commodity prices, the company deferred $200 million of 2010 capital expenditures to 2011.  Is this steep decline in rig count the manifestation of that decision?  EnCana has noted that it is not done with its land retention efforts, so the questions going forward are:
  • Can EnCana hold its leases by production with a reduced rig count?
  • Will EnCana farm-out some more leases or let others expire?
Since this is the first dramatic and visible decline in rig counts in the Haynesville Shale, it will be interesting to watch how things play out.


Anonymous said...

Yet, EnCana filed 7 permits for a single section in RR Parish this week? Very Strange.

Anonymous said...

The answer is -- leases are already expiring in RRP and will continue to do so.

Les B