Onshore rigs have fallen over 75 percent to 410 current active rigs. Still, decreases in production are slow to manifest, further delaying a price recovery. Reports form IHS show 112 total supplied rigs with 72.1 percent utilization, while sources from Baker Hughes show around 30 active rigs in the Gulf of Mexico. Both onshore and offshore represent record lows and continue to slide down further and further.
Projections from the EIA predict WTI prices in the range of $27 per barrel to $57 per barrel over the next few months. According to the Short Term Energy Outlook, the EIA also forecasts average production of 8.6 million barrel per day in 2016 and 8.0 million barrels per day in 2017, both of which are 100,000 barrels per day lower than originally forecasted. These modest decreases are expected to help lead to better commodity price markets, but are being hindered by Gulf of Mexico production.
Projections show Gulf of Mexico production increasing over the next three years, from an average 1.63 million barrels per day in 2016 to 1.79 million barrels per day in 2017, finally reaching 1.91 million barrels per day by December 2017. Making up 21 percent of the total US production by 2017, these increases are offsetting declines in total domestic production.
All of the wells producing from the Gulf of Mexico today were started five to six years ago. Longer deepwater and ultra-deep water projects were paid for long ago, leaving nothing in the way to postpone production. Even in a less than favorable price market, operators still want a return on their investment and aren’t willing to postpone production. As long as these projects persist after years of planning, Gulf of Mexico production will continue to slightly offset decline in onshore production.