The oil directed rig count has seen a permanent reduction due to increased well production rates and a reduced time to drill. A similar phenomena happened with gas directed rig counts. To add more rigs we would have to see decreasing well productivities and reduced rig efficiencies.
Why do we still maintain a staff for 30 rigs when there is no possibility of adding these rigs?
I don't want anyone to lose their job. Conoco has some wonderful people. If anything, management needs a shake up.
1) Competitive acerage that will benefit from a "ramp up" should be making money today ... ConocoPhillips may look like they have great prospects but so does everyone else at higher oil prices
2) An extra 25 rigs is a lot - consider that we used to take twice as long to drill and produce a third per well - 25 rigs today is 150 pre-crash ... thats perspective in the new reality
3) Enhanced oil recovery and refraccing will add to production without the need for drilling
Okay, just stating the obvious - an extra 25 rigs gains market share. Have we learnt nothing in the past two years?
Yes COP will revise their rig counts ramp up assumption from 30 to 25 for the L48. So, yes, they have to reduce their staffs
COP will be announcing massive layoffs just like last year on October 2015, only this time they will not wait till the 4th quarter of this year. It will happen sooner than you think, WTI is now averaging 47.00 for all of second quarter.
It will give eventually ... the numbers just don't add up.
Let's assume 1) US production is in balance 2) Global demand growth is 1.2MMbopdpy 3) US maintains market share at 9% (8.7 of 95.5) - that's 0.1MMbopdpy production growth per year.
If a rig drills twelve wells per year at an average IP of 550kbopd and averages 33% of that rate over the year - that's 2,200bopd per rig or 45 rigs added to satisfy increasing global demand in the US per year (ignoring the GoM)
A recovery lead by increases in the demand for oil will be very slow indeed and ConocoPhillips is staffed to satisfy almost 100% of non GoM production growth in the US.
Time to cut some of the leadership that are over the hill?
The amount of drillers COP is keeping around is incredible. Something has got to give.
... should have kept me - in better than out
GREAT QUESTION!