The drill rig count in the shale era just doesn’t mean what it used to during the days of traditionally drilling.   In the old days, cutting rigs immediately meant less new oil would be produced than the year before, but not anymore.

Consider the basic formula implied by the rig count:

Number of new wells drilled per year = Rig Count * average number of days to drill a well / 365

New oil production = Number of new wells * the average production of the new wells.

But in 2011, the average time for Anadarko to drill an Eagle Ford was 12 days, by the end of 2013, the average was 8 days with the record setting well only requiring 4.5 days.   In 2015, it is reasonable to assume that the drilling time will be half of 2011’s rate, so only half as many rigs are required in 2015 as 2011. Furthermore, the average oil production from new wells in the Bakken and Permian according to EIA data has doubled in the last 5 years (Bakken) and 3 years (Permian).  Everything else being equal, you’ll need half as many rigs with a doubling of production.

Combine these two observations and a 2015 rig drilling in shale is 4 times as productive as a 2011 rig.  Of course, that’s an oversimplification since no rig stays busy 100% of the time.  But at the same time, I imagine the remaining rigs are running with the best crews on the best locations, so don’t be surprised if a drop in the rig count doesn’t result in a dramatic decline in production.  Its not your father’s rig count anymore.