Lacking this integration, the independents were devastated by the oil price collapse, earning a negative rate of return on investment for years immediately following the price collapse. The vital infrastructure of our industry is being shattered. Last week, the rotary rig count of oil wells dropped to an all time low, 122. At this number the only oil wells being drilled in the United States are being driven not by a desire to find oil but by the need to meet a lease commitment. This loss of activity reflects the serious impact low oil prices will have on future production.
All oil wells deplete over time.
While new technology has made the discovery of oil more effective, it has also allowed oil reserves to be depleted more quickly. Some recent studies suggest that the current oil depletion rate in the Gulf of Mexico is now averaging 26 percent per year. This is dramatically higher than historic rates of 3 or 4 or 5 percent per year. What it suggests is that the industry must spend more money to meet future demand and maintain its reserves. One recent analysis shows the magnitude of difficulty of this task.