Colorado Drilling Rig Count Down 48% From October, Says IHS

The number of oil and gas drilling rigs in operation in Colorado continues to drop amid low energy commodity prices, and planned capital spending by energy companies also is on a downward trend.

A report Monday from IHS Global Insight — a unit of Douglas County-based global analysis company IHS Inc. — says the rig count in the state has dropped from 75 on Oct. 31 to 39 as of March 6, a 48 percent drop.

That compares to a 39 percent drop in rig count nationwide over the same period, from 1,876 to 1,141, the IHS report says.

“The energy-producing states are already feeling the sting from the low oil-price environment, as companies quickly slash spending on new exploration,” said IHS economist Karl Kuykendall.

He said that in Colorado, “the state’s nascent oil plays have … been stymied by the price declines,” as have major oil producing states like Texas, Oklahoma, North Dakota and New Mexico.

On the other hand, states such as Louisiana, Pennsylvania and Ohio “have been less impacted because these states’ energy production is geared towards natural gas, which is not expected to see a similar decline in drilling activity this year,” Kuykendall said.

“The falling rig counts are too recent to show up yet in the state economic data, but their impacts will appear as the year progresses, as fewer operating rigs translates into fewer jobs,” Kuykendall.

As for planned capital spending on wells by oil and gas companies, IHS reports a 26 percent drop from 2014 to 2015, from $7.409 billion to $5.463 billion.

But the IHS report also offers a bit of good news about the situation:

“Even though exploration activity will continue to plunge this year, oil production will still increase. Companies will continue to extract oil from existing wells and increase drilling in the most efficient plays. The rigs being taken offline will be concentrated in marginally producing regions; as a result, oil production will be higher in 2015, although the pace of growth will level off as the year progresses. Therefore, the negative impacts of low oil prices this year will be concentrated in the upstream activities (drilling and exploration), with downstream activity (refining, petrochemicals, etc.) holding up well and in some instances benefiting from lower oil prices.”