Utah State

Drilling Statistics

State of Utah and Uintah Basin Drilling Data

In a Nutshell...

Nat Gas prices stayed higher than the same periods for 2016 over the summer and inventories were lower. The most notable indicator is the increase in drilling rigs. Last year at this time there were 4 rigs in operation. We now have 11 rigs in the basin. Applications for permits to dril in Duchesne County are 4 times higher than this time last year while Uintah County applications are up 30% over last year.

Changes of Note...

First, let's look at basic economics, Supply & Demand. High supply generally means prices drop. For example, sand is cheap but gold is expensive. High demand generally means prices go up. For example, if everyone wants a "Hatchimal" for Christmas a $20 toy starts selling for $100. Nobody wants a "Pet Rock" so, you can buy one for a couple dollars.

Nat Gas inventories are at lower levels each reported month than they were in 2016 (lower supply). This has kept prices higher each reported month than they were in 2016. Higher prices mean that exploration and production are more willing to produce. They make more money. So, leaving the summer months which usually sees a slow down, we are actually seeing solid increases in applications to drill, spudded wells and eventually there will be a related increase in completed wells.

What to watch...

We are still seeing a price channel (upper and lower price restrictions) in the crude oil market. Prices per barrel seem to be locked between $46 and $50. For a short period in September oil prices rose to around $52 and hovered there a while before dropping back down into the channel. Most analysts are estimating the average break-even price point for production at $42. So, when the price gets up around $50 producers release more oil to make more money and greater supply drives the price down. When the price gets close to $46, they slow the flow because they don't make as much money. Reduced supply causes the price to increase.

Here's the catch. Those companies still have expenses to meet, people to pay, etc. If the price drops below $46 and stays there for a while, instead of going hungry, they will sell more oil and drive the price down further which means less drilling here in the basin. If the price goes above $50 and stays there a while, drilling will pick up because those companies will want to sell more at that higher price.

Keeping in mind, all of that is driven by the nation's economy in general. If the economy is slow, business doesn't need as much petroleum. If the nation's economy really takes off, so will the demand for energy.

Annualized = Projected based on current numbers. APD=Application for Permit to Drill, Spudded=Started. Apd, Spud and Completed numbers come from the Utah Division of Oil Gas & Mining. Rig numbers come from Baker Hughes. Price and inventory numbers come from the U.S. Energy Information Administration.

 

Drilling Statistics

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