First, modern tight oil and gas development continually requires a large number of new wells to maintain and increase total production volumes. Separately, rig cycle times have been on the decrease, so that the number of active rigs has actually gone down over the last few years, even as production has increased.
Consequently, today drilling rigs are moving at a furious pace. To begin to illustrate my point, let’s first look at a map of current drilling rig locations from the DI Rigs dataset.
Drilling Rig Locations
For a map geek like me, this is already a visual feast. From this map we are able to see hot spots of activity, both across the country and within individual plays. The solitary rigs are also intriguing as a potential leading indicator.
But as interesting as the map is, it fails to highlight the dynamism of the industry. We can enhance the map by adding a trail of location history to each rig.
Drilling Rig Movements
Here, I’ve included rig movements from just the first seven weeks of 2014. To indicate direction of movement, I’ve given the lines a color gradient from yellow at the departure point to red at the destination. We can see there has already been an incredible amount of activity this year.
With this additional information, new patterns become apparent. We observe that most rig movements are small and remain within the same play. We can also see which plays have exchanged rigs and the net flow of rigs into or out of each play.
The relative isolation of the Marcellus from the rest of the major plays is apparent from the map. The Bakken has seen a fair amount of rig movement, both inbound and outbound. But the big take away for me is that the Permian has been the clear winner, having acquired rigs at the expense of the Granite Wash, Woodford, Barnett, Haynesville, Eaglebine, and Eagle Ford plays.
Drilling Rigs in Context
Looking a little deeper, I was intrigued by the significant migration of rigs from the Granite Wash / Woodford area into the Permian. I found that most (five of seven) of these rig movements were the result of a single drilling contractor/operator relationship: Cactus Drilling and Cimarex Energy.
These five rigs are all Cactus rigs that have moved into the Permian to drill Cimarex acreage. Currently, Cactus provides about half of Cimarex’s drilling rigs and Cimarex is one of Cactus’ largest customers. So at least for this moment in the frenzy, the fortunes of these two companies are tightly intertwined.
Rig location maps have always played an important part in understanding the industry for investors, operators, and service companies. But as seen from just the first seven weeks of the year, we gain a better understanding by focusing on activity over a time interval, rather than just a snapshot. As the rig movement map continues to fill out over the course of 2014, we’ll revisit this analysis with additional insights.
What do you think? Are you noticing more or less rig movement in your neck of the woods? Leave a comment below.