In the unconventional gas resource era, falling rig counts no longer mean declining production, and the traditional rig count no longer tells the tale of where the industry and the market are going, according to Bentek Energy LLC.
"It takes far fewer rigs in today's environment to accomplish what the historical rig count used to do," said Bentek's Tom Sherman, a senior energy analyst. "With the efficiency gains per rig that we are seeing in today's rig fleet, production can remain flat or even increase with a rig count that is 50% less than what it was last year."
Bentek chose to base its index on the RigData rig count instead of the popular Baker Hughes rig count for a number of reasons, explained Bentek Managing Director Rusty Braziel.
"One of the reasons why the rig count from RigData is higher than Baker Hughes is that RigData includes basically all rigs, where Baker Hughes has a cutoff point on size. The smaller rigs don't get counted in Baker Hughes," he said. "That's a particular issue in some basins, like for instance the Marcellus where there's a lot of smaller rigs running around just because of the logistics of that part of the country.
"One of the reasons our [BPI] number is larger than the Baker Hughes number is we're starting with the RigData number in the first place. The second is because we're including both oil and gas rigs. A lot of folks when they're looking at the gas industry don't do that. Of course, about 20% of the oil rigs that are drilling have associated gas with them. It's always difficult to tell when there's associated gas and when there's not and so we took the most inclusive approach that we could and included both oil and gas rigs into the total."
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