Baker Hughes Weekly US Land Rig Report - Dec 23 2020

This week, the Baker Hughes Weekly US Land Rig Report showed 329 active rigs, up 1 rig from last week. ArkLaTex and MidCon were both up 2 rigs this week, While the Northeast, DJ and Permian each lost 1 rig. The rig count over the next couple of weeks may look weird due to the holidays. The data should be more accurate in January as everyone returns to work.

Happy Holidays to everyone

Figure 1: Baker Hughes US Land Weekly Rig Count - Dec 23 2020

Table 1: Baker Hughes US Land Rig Count by State - Dec 23 2020

Baker Hughes US Land Weekly Rig Count - Dec 18 2020

In the latest US Land Weekly Rig Count, the US Land Rig Count climbed 5 rigs to finish at 328 active rigs in US Land. The Permian added 6 rigs while the DJ Basin lost 1 rig. All of the Permian additions this week were in New Mexico, likely in response to potential drilling regulation changes on federal lands with the Biden administration

While a frac ban on federal lands will be a problem for the industry, the current oil price and company debt is a far more pressing issue. Most forecasts project that oil prices will stay between $40 and $50 for most of 2021, which is above breakeven for most plays. Unfortunately, running at breakeven doesn't include paying off debt, paying dividends and cash flowing new wells. Unless there is a major change in oil prices, we will see more consolidation and bankruptcies in 2021.

Figure 1: Baker Hughes US land Rig Count - Dec 18 2020

Table 1: US Land Weekly Rig Count by State - Dec 18 2020

The Baker Hughes Weekly Rig Count for the US Land increased 15 rigs this week to finish at 323 active rigs. The Permian added 4 rigs, the Northeast, Powder River and Eagle Ford added 3 rigs each, the MidCon and DJ Basin each added 1 rig. Drilling activity continues to increase toward the end of the year even though completions are lagging.

There have been several different reports of a supply crunch in the future due to an underinvestment in the industry. Internationally, there has been a lack of investment for more than 6 years as the US conventional plays added to the global oil supply. Once we work our way through the oil surplus created by COVID, there will be a lack of lack of investment will show there are limited supplies to respond to demand changes and that should drive oil prices up significantly. While the timeline for such an event is unknown, I would guess that we should it in the next 5 years.

Figure 1: Baker Hughes US Land Rig Count - Dec 11 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Rig Count - Dec 11 2020
(Source: Baker Hughes)

Baker Hughes US Land Weekly Rig Report - Dec 4 2020

This week, the Baker Hughes US Land rig count showed that there were 308 active rigs working in US Land, up 2 from last week. The Permian added 3 rigs and the DJ Basin added 2 rigs. The Northeast, Powder River Basin and California each lost 1 rig.

Oil prices have climbed over the last couple of weeks as the potential for a vaccine has the market beleiving that there will be an increase in oil demand in the next few months. While a vaccine will help things return to "normal" there plenty of supply in the market to moderate prices. The OPEC+ agreeing to increase production quotas in January, oil prices will likely remain in the $40 to $50 range.

Figure 1: Baker Hughes Weekly US Land Rig Count - Dec 4 2020
(Source: Baker Hughes)

Table 1: Baker Hughes Weekly US Land Rig Count - Dec 4 2020
(Source: Baker Hughes)

Baker Hughes US Land Weekly Rig Count and EIA DUC Data

The Baker Hughes US Land Weekly Rig Count showed that there were 306 active rigs in the US, up 10 rigs from the previous week. The Permian added 5 rigs, while the Eagle Ford and West Coast each added 2 rigs. The DJ Basin added 1 rig this week. 

While rig count continues to increase, the current drilling activity is insufficient to maintain current US porduction levels. I have heard several different forecasts, but we likely need more than 600 active horizontal rigs in order to maintain the US production rate at or above 10 million BOPD. Until rig counts increase, operators have been completing DUCs to meet their production goals.

Figure 2 shows the monthly DUC data from the EIA. There are many opinions that the EIA DUC data is flawed and I tend to agree with them. I also believe that all DUC data is flawed because it is so difficult to measure what is a DUC versus what is a normal inventory well. Regardless, the EIA data shows that the DUC count has been decreasing for several months. We should expect that the DUC count will continue to fall until drilling activity increases. If drilling activity doesn't increase by the end of 2021, the majority of the DUCs will be completed by that time.

Figure 1: Baker Hugghes US Land Weekly Rig Count - Nov 27 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Data - Nov 27 2020
(Source: Baker Hughes)

Figure 2: EIA Monthly DUC Data
(Source: EIA)

Baker Hughes Weekly US Land Rig Count - Nov 20 2020

This week, the Baker Hughes US Land Weekly Rig Counmt decreased by 1 rig to setlle 296 active rigs. The Permian added 2 rigs and the ArkLaTex added 2 rigs, while the Eagle Ford, MidCon, Powder and Bakken each lost 1 rig.

Rig count appears to be stablizing with no signs of decreasing signficantly. There are plenty of signs and discussion that completions are slowing. This is probably temporay until budgets resent in January. There should be concern that a prolonged second wave of COVID cases could have an impact on demand. So far that hasn't happen yet.

Figure 1: Baker Highes US Land Weekly Rig Count - Nov 20 2020
(Source: Baker Hughes)

Table 1: Baker Highes US Land Weekly Rig Count - Nov 20 2020
(Source: Baker Hughes)

Baker Hughes US Land Weekly Rig Report - Nov 13 2020

The Baker Hughes US Land Rig Count was up 11 rigs to 297 active rigs rigs. The Permian gained 7 rigs while the ArkLaTex, Midcon, Eagle Ford and Northeast eached gained 1 rig. For the first time in a while, there weren't any losses of rigs in any regions.

Oil prices continue to remain around the $40 range for both WTI and Brent. In the past week, OPEC+ has agreed to extend current productiom cuts and may attempt to keep production at current levels for the next 3 to 6 months. Even with those cuts, the market will remain balanced or slightly oversupplied. It remains to be seen what happens to oil demand as a second wave of COVID cases continues to increase throughout the world

Figure 1: Baker Hughes US Land Rig Count - Nov 13 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Rig Count - Nov 13 2020
(Source: Baker Hughes)

Baker Huighes Weekly Rig Report - Nov 6 2020

This week the Baker Hughes Rig Count was up 4 rigs to 286 active rigs in US Land. The Permian saw an increase of 5 rigs, the Eagle Ford increased by 3 rigs and the ArkLaTex increased by 1 rig. The Northeast lost 2 rgis and the MidCon dropped 1 rig. 

The rig count continues to climb as oil prices have stabilized and operators look to maintian production volumes. There are indications coming from the field that completions are beginning to slow down for the end of the year. I expect that rig count will be maintained as operator build DUCs for completion programs in 2021.

Figure 1: Baker Hughes Weekly Rig Report - Nov 6 2020

Table 1: Baker Hughes Weekly Rig Report - Nov 6 2020

Baker Hughes Weekly Rig Report - Oct 30 2020

The rig count recovery continues this week, with the Baker Hughes Rig Count showing an increase of 9 rigs to 282 active rigs in US Land. The Permian Basin added 9 rigs, the Eagle Ford added 1 rig and the MidCon lost one rig. 

With all of the mergers happening in recent weeks, it remains to be seen if this result in an increase or decrease in acitivty. Most operators have stated that they will attempt to maintain flat production in 2021. This should result in an increase in rigs through 2021 but the finalk total will be difficult to determine. The impact of COVID through the fall and winter is a huge unknown right now.

Figure 1: Baker Hughes Weekly Rig Count - Oct 30 2020
(Source: Baker Hughes)

Table 1: Baker Hughes Weekly Rig Count - Oct 30 2020
(Source: Baker Hughes)

Baker Hughes US Land Weekly Rig Report - Oct 16 2020

This week, the US Land Rig Count increased 13 rigs this week to 267 active rigs. The ArkLaTex and Bakken each added one rig, the MidCon added 2 rigs, and the Eagle Ford added 5 rigs. The Permian was flat while the DJ Basin was down one rig.

Since the low point of 230 rigs on the week of August 14, the rig count has increased 16%. After the low point, the rig count skipped along the bottom for several weeks as the market continued to adjust to lower prices. Over the last 6 weeks, we have seen the rig count increase in most areas as operators returned to drilling. 

With Q3 results coming out over the next several weeks, we should learn about plans for Q4 and the start of 2021.

Figure 1: Baker Hughes US Land Weekly Rig Count - Oct 16 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Count - Oct 16 2020
(Source: Baker Hughes)

 

HFIR - Implied IEA Oil Supply And Demand Balance Suggests No Excess Inventories By Year End

Summary

• IEA's oil market report was released yesterday suggesting a Q4 2020 market deficit of 4.1 mb/d.
• Excess oil inventories for OECD is pegged at 209.1 million barrels. This means that the deficit in Q4 will eliminate all of the surpluses and more.
• In addition, we have US oil production materially lower than IEA's ~11 mb/d average for Q4, which means there's potentially more draws ahead.
• Now all of this is also hinged on demand returning to average ~96.1 mb/d for Q4, so this remains the largest variable to get right.
• So unless IEA can't do math or something goes awfully wrong, it does appear that the excess oil inventories should be eliminated by year-end.

https://seekingalpha.com/article/4379299-implied-iea-oil-supply-and-demand-balance-suggests-no-excess-inventories-year-end

OilPirce.com - The Next Couple Of Months Are Crucial For U.S. Oil

The U.S. oil industry faces a bumpy road to recovery from the steepest slump in oil demand in history.

Oil demand in the United States and elsewhere is still trailing below last year’s levels, while a growing number of indebted shale producers struggle to refinance debts at these low oil prices and file for bankruptcy protection to restructure debt loads.

Oil prices may remain lower for longer with global oil demand unlikely to return to pre-crisis levels by the end of 2021, piling further pressure on the U.S. shale patch which, executives say, will need WTI Crude prices above $46 a barrel to see a substantial increase in completions of drilled but uncompleted wells (DUCs).

On top of the immediate financial concerns of many producers about profitability and debt levels, the U.S. oil industry also faces a shift in markets’ perception about the sector with increased investor calls for decarbonization.

https://oilprice.com/Energy/Energy-General/The-Next-Couple-Of-Months-Are-Crucial-For-US-Oil.html

Baker Hughes US Land Weekly Rig Count - October 9 2020

This week, the Baker Hughes US Land Weekly Rig Count rose by 3 rigs to reach 254 active rigs. The Eagle Ford addded 2 rigs and the Permain added 1 rig while the Northeast lost 1 rig. The rig count continues to move in a positive direction even though current oil prices have dropped in recent weeks.

Figure 1: Baker Hughes US Land Weekly Rig Report - October 9 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Report - October 9 2020
(Source: Baker Hughes)

Houston Chronicle: Dallas Fed: Most oil executives say U.S. production has peaked

Most Texas oil and gas executives believe U.S. oil production has peaked, according to a survey conducted by the Federal Reserve Bank of Dallas and published last week.

In a survey on the state of the oil and gas industry, 66 percent of respondents said they believe oil production in the U.S. has reached its maximum level, while 34 percent said they do not.

The U.S. oil and gas sector has struggled amid a spring collapse in oil prices driven by the COVID-19 crisis. Since then, global demand for oil and refined products has fallen and business activity in the sector has declined.

https://www.houstonchronicle.com/business/energy/article/Majority-of-oil-and-gas-executives-believe-U-S-15612980.php

Baker Hughes US Land Weekly Rig Count - Oct 2 2020

 The Baker Hughes US Land Weekly Rig Count for this week was up 5 rigs this week with 251 active rigs in US Land. The Permian added 4 rigs and the Bakken added 1 rig. All other areas remained flat this week.

Figure 1: Baker Hughes US Land Weekly Rig Count - Oct 2 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Count - Oct 2 2020
(Source: Baker Hughes)

World Oil - Oil demand won’t recover for at least 18 months, say top traders

(Bloomberg) --Global oil demand won’t meaningfully recover for at least 18 months, said the heads of the world’s biggest independent trading houses.

Speaking at the FT Commodities Global Summit on Tuesday, some of the most influential people in the oil market offered a dim outlook.

“It is very hard to be bullish on the oil price now and into Christmas,” said Ben Luckock, co-head of oil trading at Trafigura Group.

Mercuria Energy Group Chief Executive Marco Dunand said oil consumption could rebound from the coronavirus in about 18 months, while Torbjorn Tornqvist, his counterpart at Gunvor Group Ltd., and hedge fund manager Pierre Andurand both saw the timeframe closer to two years.

Daily consumption is still 4 million to 5 million barrels day below where it was expected to be before the pandemic, said Russell Hardy, the chief executive of Vitol Group, the biggest independent oil trader. He doesn’t expect a meaningful pickup in demand until at least the summer of 2021.

https://www.worldoil.com/news/2020/9/30/oil-demand-won-t-recover-for-at-least-18-months-say-top-traders?id=31307113

Liberty Oilfield Services - How Frac Crew Efficiency May Impact Future Frac Fleet Demand

OPEC recently revised downward its outlook for global oil demand to an average of 90.2 MMBOPD (million barrels of oil per day) in 2020. That reflects an average 2020 demand contraction of 9.5 MMBOPD year-on-year, or close to a 10% reduction.

For 2021, it expects global oil demand to grow by 6.6 million bpd to an average of 96.9 MMBOPD next year. For the United States, EIA expects U.S. crude oil production to fall from an average of 12.2 MMBOPD in 2019 to 11.4 MMBOPD in 2020 and 11.1 MMBOPD in 2021.

US Shale represents a growing share of all US (crude and condensate) production. As we infer from the graph below for March 2019, 54% of all US production came from shale; 14% from deep water; and, 32% from conventional.

https://www.linkedin.com/pulse/how-frac-crew-efficiency-may-impact-future-fleet-demand-leen-weijers/?trackingId=PcMvzSEX12sXijK3JLarsg%3D%3D

World Oil - As U.S. drilling plummets to 122-year low, losses may intensify in second half

The spread of Covid-19 caused widespread disruption to financial and commodity markets during the first half of 2020. Extended government-sponsored lockdowns resulted in economic hardship and a dramatic decline in demand for jet fuel, gasoline and diesel. When the virus-induced disruption was at its peak in March/April, demand for gasoline fell 45%, with only partial recovery in May/June. Jet fuel also took a major hit, with commercial flights down 80% in April, compared to January levels. The combination of oversupply and loss of demand led to a rapid and intense bust scenario, which was one of the most detrimental in the industry’s history.

To revitalize crude markets, OPEC+ reduced oil production in June to its lowest level since the Gulf War in 1991. The reductions came after record cuts in May by Saudi Arabia and Russia, which slashed output by 29% and 17%, respectively. Production in the U.S., during the same timeframe, fell just 8%. The masterfully coordinated OPEC+ reduction strategy pushed WTI and Brent prices up 50% in just two months, to average $38/bbl and $41/bbl in June.

https://www.worldoil.com//magazine/2020/september-2020/global-mid-year-forecast/as-us-drilling-plummets-to-122-year-low-losses-may-intensify-in-second-half?id=31307113

Weekly Baker Hughes US Land Rig Count - Sept 25 2020

This week, the Baker Hughes US Land Weekly Rigs Report showed that US Land rigs increased by 6 to 246 active rigs. The Eagle Ford added 4 rigs, the Permian added 2 rigs and the ArkLaTex and Northeast each added 1 rig.

Looking back over the last 12 weeks, it appears that we hit a low of 230 active rigs and rig count has rebounded by 7% since August 14. Permit count can serve as an indicator in future activity and several reports show that permit count remains depressed over the last few months. I expect that rigs may rebound for a few more weeks until we reach Thanksgiving. At that point, operators may decided to lay down rigs and frac fleets until the end of the year. We should hear more as Q3 results start to come out at the beginning of November.

Figure 1: Baker Hughes US Land Weekly Rig Count - Sept 25 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Count - Sept 25 2020
(Source: Baker Hughes)

Baker Hughes US Land Weekly Rig Report - Sept 18 2020

This week, the Baker Hughes US Land Weekly Rig Report showed that there were 240 active rigs in US Land, up 2 rigs from last week. The ArkLaTex, Northeast and Bakken each added 1 rig while the Permian lost 1 rig.

Rig Count continues to slide in the Permian as the larger operators continue to release rigs. I think that we are getting very close to a bottom in Permian activity. As oil prices dip below $40 dollars again, that will continue to add more uncertainty for the end of this year and 2021. 

Figure 1: Baker Hughes US Land Weekly Rig Report - Sept 18 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Report - Sept 18 2020
(Source: Baker Hughes)

EIA: Short-term energy outlook remains subject to high uncertainty

The US Energy Information Administration’s September Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus disease (COVID-19) continue to evolve.

Brent crude oil spot prices averaged $45/bbl in August, up $2/bbl from the average in July and up $26/bbl from the multiyear low monthly average price in April. The increase in oil prices has occurred as EIA estimates global oil markets have shifted from global liquid fuels inventories building at a rate of 7.2 million b/d in the second quarter to drawing at a rate of 3.7 million b/d in the third quarter.

https://www.ogj.com/general-interest/economics-markets/article/14183070/eia-shortterm-energy-outlook-remains-subject-to-high-uncertainty

Rystad Energy - DUC well inventory sufficient to support US fracking deep into 2021, 280-300 rigs needed afterwards

The recovery of fracking operations in the US is happening largely thanks to an unusually high inventory of drilled but uncompleted wells (DUCs), which is strong enough to sustain the current level of fracking without the industry adding more rigs to expand drilling deep into 2021, a Rystad Energy analysis shows. After DUCs run out, however, rig activity in the five key oil regions needs to be in the 280-300 range to maintain flat oil output.

Actual rig activity today is almost 50% lower than that requirement, but the industry still has about two to three quarters of leverage, based on the current DUC count, to achieve a smooth transition from a DUC-driven activity phase to a regular operations mode.

https://www.rystadenergy.com/newsevents/news/press-releases/duc-well-inventory-sufficient-to-support-us-fracking-deep-into-2021-280-300-rigs-needed-afterwards/

Baker Hughes US Land Weekly Rig Report - Sept 11 2020

 The Baker Hughes US Land Weekly Rig Count was down 2 rigs this week to 238 active rigs. The ArkLaTex, Northeast and Permian each dropped one rig. The MidCon added 1 rig this week.

The ratio between oil rigs and gas rigs has stabilized over the last few weeks. As the oil rig count dropped dramatically at the start of the downturn and  slight increase in the gas rig count, the ratio between oil rigs and gas rigs is now 71% oil rigs and 29% gas rigs. Before the downturn, the ratio was 86% oil rigs and 14% gas rigs. If gas prices can hold on to current price increases, this ratio may continue to swing upward for gas rigs

Figure 1: Baker Hughes US Land Weekly Rig Count - Sept 11 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Count - Sept 11 2020
(Source: Baker Hughes)

JPT - The End Is Near for the Oil-Demand Surge

Oil consumption has recovered at a record pace but a report from IHS Markit said it is nearly at its limit. And don’t expect it to recover to the peak seen in February anytime soon.

The energy information and consulting firm said the rally, which pushed up demand by13 million B/D to 89 million B/D, is likely to continue to around 92–95 million B/D, well short of its 100 million B/D peak early this year.

“For demand to fully return, travel—especially air travel and commuting to work—needs to get back to normal. And that won’t happen until there is containment of the virus and effective vaccines,” said Jim Burkhard, vice president and head of oil markets for IHS Markit.

https://pubs.spe.org/en/jpt/jpt-article-detail/?art=7548

OilPrice.com - Global Oil Demand To Return To Pre-Crisis Levels In Three Years

It will take three years for global oil demand to rebound to pre-pandemic levels, as jet fuel consumption continues to trend much lower than last year’s levels, according to Bank of America Securities.

While road fuel demand has recovered to nearly pre-COVID-19 levels, aviation fuel demand is struggling to take off materially as air travel is still significantly down compared to ‘normal’ levels from before the pandemic, BofAS said in a weekly energy reported carried by TradeArabia.

Air travel will not rebound until an effective vaccine or cure for COVID-19 is rolled out, the BofAS analysts said. An effective vaccine, however, is still 12 to 18 months down the line, according to the bank.

https://oilprice.com/Energy/Crude-Oil/Global-Oil-Demand-To-Return-To-Pre-Crisis-Levels-In-Three-Years.html

Baker Hughes Weekly Rig Count - Sept 4 2020

For the 3rd week in a row, the Baker Hughes US Land Rig Count has held steady atr 240 rigs. The Bakken dropped one rig while the ArkLaTex added one rig. The Permian Basin was flat for the second week in a row with 125 active rigs.

There has been a lot of discussion around DUCs and the current inventory available for fracing. I have seen some data that shows DUC count is slowly decreasing as operators frac DUCs and do not drill new wells. This has resulted in an up tick in frac activity while there hasn't been an increase in new wells drilled. At some point, the DUC count will drop to the point where frac activity will decline again. Since there is usually a 4 to 6 month lag from the time a well is drilled until it is fraced, we could see another signficant slow down in frac activity in the first part of next year.

Figure 1: Baker Hughes US Land Rig Count - Sept 4 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Rig Count - Sept 4 2020
(Source: Baker Hughes)

Table 2: Baker Hughes US Land Rig Count - Sept 4 2020
(Source: Baker Hughes)

Seeking Alpha - The Death Of U.S. Shale Is Greatly Exaggerated, But It's Crippled For Life

Summary

• A discussion on US oil production often falls into two extreme camps.
• The truth is often something in between, but because of a fundamental change in how credit is going to be provided for US shale producers going forward, it's crippled for life.
• There also are enormous implications for inflation. Since 2010, US oil production has been the key growth driver in the non-OPEC group.
• With US shale oil crippled, this source of growth is gone, and as a result, will result in much higher oil prices going forward, which will boost inflation.

https://seekingalpha.com/article/4371775-death-of-u-s-shale-is-greatly-exaggerated-crippled-for-life

Baker Hughes Weekly Rig Count - August 28 2020

The Baker Hughes US Land Rig Count was flat this week compared to last weeek, with 240 active rigs in the US. The Permian Basin lost 2 rigs, the Eagle Ford lost 1 rig and the ArkLaTex region added 3 rigs. All of the other regions remained flat.

I've been hearing alot of discussions about how US production will remain flat next year and grow in 2022. In order for that to happen, there has a be a signficant rebound in rig count and active frac fleets. If we want US Production to remain above 11 million BOPD, then rig count is going to have to grow back to 800 rigs and we will need more than 200 active frac fleets. I'm not sure how we get there at today's prices, but that's where we need to go.

Figure 1: Baker Hughes US Land Weekly Rig Count - August 28 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Count - August 28 2020
(Source: Baker Hughes)

Table 2: Baker Hughes US Land Weekly Rig Count - August 28 2020
(Source: Baker Hughes)

OilPrice.com - Why Shale Executives Should Jump On The ESG Trend Now

ESG (Environmental, Social, and Corporate Governance), like pretty much everything else in this increasingly partisan world, has become an extremely divisive topic in the business sector. While many think that more socially and environmentally conscious investment and business practices are the best way forward and a central pillar of the future global economy, others dismiss it as leftist and utopian. While some argue that ESG is an inevitable trend (accelerated by the novel coronavirus’ interruption to business as usual), the Trump administration has threatened to make it illegal. A new proposed regulation from the U.S. Department of Labor would expressly prohibit the department from including ESG in any decision-making criteria when it comes to U.S. employer-provided pension funds, in an apparent bid to protect Big Oil.

https://oilprice.com/Energy/Energy-General/Why-Shale-Executives-Should-Jump-On-The-ESG-Trend-Now.html

Rystad Energy - Even at $40 WTI, about 150 more North American E&Ps will need Chapter 11 protection by end-2022

The Covid-19 pandemic has added severe financial strain on a North American upstream industry that was already reeling under billions of dollars of debt. With WTI climbing past $40 a barrel, most exploration and production firms (E&Ps) have been able to keep their head above water, but unless prices strengthen further about 150 more E&Ps will need to seek Chapter 11 protection through 2022, a Rystad Energy analysis shows.

So far this year, according to Haynes & Boone, 32 E&Ps have already filed for Chapter 11, recording a cumulative debt of about $40 billion. On the oilfield services (OFS) front, 25 companies have filed for Chapter 11. If WTI remains at $40, Rystad Energy estimates 29 more E&P Chapter 11 filings this year, adding another $26 billion of debt at risk.

https://www.rystadenergy.com/newsevents/news/press-releases/even-at-$40wti-about-150-more-north-american-eps-will-need-chapter-11-protection-by-end-2022/

World OIl - Major forecasters agree: No oil demand recovery until at least 2022

LONDON (Bloomberg) --Global oil demand won’t return to 2019 levels until at least 2022 and the gap may be getting wider than it seemed a month ago.

All three of the world’s main oil forecasting agencies — the International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries — published new quarterly forecasts this week and none project oil demand back at 2019 levels by the end of next year.

https://www.worldoil.com//news/2020/8/14/major-forecasters-agree-no-oil-demand-recovery-until-at-least-2022?id=31307113

BTU Analytics - Montage Acreage Provides Southwestern Optionality in SW Appalachia

While many in the market have been focused on what consolidation will come in the major oil plays as a result of the pandemic-driven low oil prices, such as from the Chevron-Noble acquisition, gas producers have also made moves to better position themselves in a low liquids price environment. Most recently, Southwestern announced that it would acquire Montage Resources in an all-stock deal. In addition to making the combined entity the third largest Northeast producer, the Montage assets give Southwestern greater optionality in its SW Appalachia acreage to choose between dry gas acreage when liquids pricing is low and wet gas acreage when liquids pricing is high. This optionality is key at a time when liquids pricing is expected to remain pressured as the world recovers from the COVID-19 pandemic and its resulting impacts to hydrocarbon demand. Today’s energy market commentary will utilize BTU Analytics E&P Positioning Report to analyze Southwestern and Montages acreage and the flexibility afforded to Southwestern by the acquisition.

https://btuanalytics.com/shale-production/montage-acreage-provides-southwestern-optionality/

In a complete reversal of the downward trend since March, the Baker Hughes US Land Weekly Rig Count was up 10 rigs this week. The Permian added 10 rigs this week, reversing their downward trend also. The ArkLaTex added 1 rig while the Bakken and Eagle Ford each lost a rig.

While this is positive news for the industry, we should expect many ups and downs through out the coming months as we work through the downturn. Many forecasts discuss flat US production for 2021. For that to happen, both the rig count and frac fleet count will have ti increase significantly.

Figure 1: Baker Hughes US Land Weekly Rig Count - August 21 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Count - August 21 2020
(Source: Baker Hughes)

Table 2: Baker Hughes US Land Weekly Rig Count - August 21 2020
(Source: Baker Hughes)

Seeking Alpha - WTI: The Prospects For Oil In The Second Half Of 2020

Summary

• Oil will soon make a move out of its current $40-$43 trading range higher due to a lack of drilling activity to replace bbls lost to decline.
• It's more a matter of when than if.
• We see U.S production falling to ~7-8 mm BOEPD by year's end.

https://seekingalpha.com/article/4369306-wti-prospects-for-oil-in-second-half-of-2020

Seeking Alpha - A Contrarian View On U.S. Oil Production

Summary

• Our contrarian view on US oil production is that the rebound observed in July and August so far is way higher than what the consensus is estimating.
• With all of the shut-in production returning, US oil production is expected to peak at ~11.7 mb/d in August.
• Monthly basin decline rates at today's completion activity level is ~260k b/d.
• By year-end, this will push US oil production down to ~10.7 mb/d.
• If frac spread count doesn't rebound to 175+ by Q1 2021, then US oil production will fall to low ~10 mb/d.

https://seekingalpha.com/article/4369311-contrarian-view-on-u-s-oil-production

Rystad Energy - US shut-in oil comes back: Most curtailed output is set to return by the end of August

Most US onshore operators will restore nearly all shut-in oil volumes by the end of the third quarter, with only a handful maintaining some level of curtailment for the rest of the year, a Rystad Energy analysis of 25 public oil operators’ second-quarter earnings statements shows.

Curtailments from the 25 companies peaked in May with a net 772,500 barrels per day (gross – including royalties to the government - 965,600 bpd) taken off the market. Total cuts decreased to a net 680,300 bpd in June. In July, only about 306,500 bpd in net volumes (383,100 bpd gross) remained curtailed. This number is expected to fall to a net 74,300 bpd (92,900 bpd gross) in August, with nearly all production set to be reactivated by September and just a small amount remaining offline.

http://communications.rystadenergy.com/acton/rif/12327/s-0dd9-2008/-/l-0ac8:295/l-0ac8/showPreparedMessage?sid=TV2:59uFtis2b

Baker Hughes US Land Weekly Rig Count - August 14 2020

The Baker Hughes US Land rig count continued to slide this week, down 5 rigs to 230 active rigs. The Permian Basin dropped 5 rigs (4 from Texas and 1 from New Mexico) while the other areas remained stable. One of the reasons behind the drop in Permian rig count is that the larger operators (in particular ExxonMobil) have been slower to react to the current market conditions with rig count reductions. I read an article earlier this week that ExxonMobil still had >25 rigs active and they were planning to get down to 15 rigs before the end of the year. 

On the brighter side, there appears to be a lot more discussion about restarting operations. I have seen a couple of articles/reports discussing the potential for under supply in the midterm. Hopefully rig additions by other operators can offset the rig reductions by the larger operators like Exxon Mobil.

Figure 1: Baker Hughes US Land Weekly Rig Count - August 14 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Weekly Rig Count - August 14 2020
(Source: Baker Hughes)

Table 2: Baker Hughes US Land Weekly Rig Count - August 14 2020
(Source: Baker Hughes)

Rystad Energy - US permits for new horizontal drilling dip to 10-year low, hinting no strong rebound in 2020 activity

US horizontal drilling activity in oil basins, which has plummeted due to the Covid-19 pandemic, is not likely to materially recover this year, a new Rystad Energy analysis shows. Drilling permits, which are increasingly reliable indicators of future activity levels, dipped to a 10-year monthly low this July, with only 454 awards.

July’s drilling permits number is the lowest since September 2010, when horizontal permits in oil basins amounted to 438. But unlike the current situation, activity then was on the increase, while the current downturn is still under way. Comparing to the previous downturn, the lowest count was in January 2016, when only 622 permits were awarded.

Drilling permits have generally been viewed as low quality predictors of future drilling activity, as operators have a tendency to overbuild their inventory of permits. However, the quality of predictions based on permits has improved considerably, as producers have become more disciplined in the current capital environment and market downturn.

http://communications.rystadenergy.com/acton/rif/12327/s-0dd2-2008/-/l-0ac8:295/l-0ac8/showPreparedMessage?sid=TV2:eY82nmguz

World Oil - Impact of Covid-19 on oil supply, demand and price to 2030

The petroleum industry is undergoing an unprecedented demand disruption and requires accurate forecasting and real-world economic models to maximize profitability. To accomplish the objective, an analysis was prepared, using a proprietary global petroleum model that combines geopolitical and macro-economic scenarios to generate quantitative outcomes for:

• GDP growth
• Crude oil/natural gas supply and demand
• Oil price.

The model is underpinned by proprietary global databases of oil and gas fields, global potential of exploration, light tight shale oil (LTO) and shale gas basins.
SCENARIOS

Two representative scenarios from a set are presented below. These focus on the impact of the Covid-19 pandemic. The scenario models generate crude oil, NGL and natural gas supply, demand and price outcomes for:

• Optimistic case: one wave of Covid-19 pandemic with rapid “V” shaped economic recovery.
• Pessimistic (realistic?) case: two-wave pandemic, extending into Q2 2021 with a slow economic rebound.

https://www.worldoil.com//magazine/2020/august-2020/features/impact-of-covid-19-on-oil-supply-demand-and-price-to-2030

Reuters - How a Texas shale supplier's founders made fortunes as the firm failed

Aug 13 (Reuters) - On July 7, the board of directors at Texas fracking sand supplier Hi-Crush granted nearly $3 million in bonuses to four top executives, including $1.35 million for CEO and founder Robert Rasmus.

Five days later, the company declared bankruptcy.

The payout marked the latest in a series of board decisions that allowed the oilfield supplier’s top executives and founders to rake in tens of millions of dollars as shareholders saw the stock price plummet to pennies.

https://www.reuters.com/article/usa-oil-hicrush-deals/rpt-insight-how-a-texas-shale-suppliers-founders-made-fortunes-as-the-firm-failed-idUSL1N2FF0PD

OilPrice.com - Here’s How Oil Could Skyrocket By 138%

The market is gradually beginning to give credence to something I've been discussing in past OilPrice articles for a long time now. In a June, 2020 article entitled, Underinvestment Could Send Oil Prices Soaring, I argued how the retrenchment and lack of capital investment the industry has seen the past five-years would lead to shortages of crude eventually. The huge volume of Saudi overproduction exacerbated the equal largess in American shale for the past couple of years, and led to a glut of crude globally.

https://oilprice.com/Energy/Energy-General/Heres-How-Oil-Could-Skyrocket-By-138.html

Rystad Energy - Covid-19 pushes OFS headcount to lowest level in over a decade, revenue per employee set to decline

The oil market turmoil brought on by Covid-19 has led to lower-than-anticipated activity and delayed projects, forcing the industry to deploy cost-cutting measures. A Rystad Energy analysis of the top 50 oilfield service (OFS) firms shows that staffing is set to reach its lowest level in more than 10 years, with the anticipated revenue per employee also declining towards the previous downturn’s level.

Rystad Energy tracks the permanent employee count of the top service companies, including reported permanent employees at year-end. Our analysis shows that the reduced staff levels in the OFS industry seen in 2016, after the previous downturn, have mostly been maintained since then at just over 760,000 employees, keeping a major cost driver – investment in human capital – at steady low levels.

However, the downsizing expected this year is likely to result in the OFS industry experiencing the lowest total headcount in over a decade, which we estimate will amount to about 610,000 employees.

https://www.rystadenergy.com/newsevents/news/press-releases/covid-19-pushes-ofs-headcount-to-lowest-level-in-over-a-decade-revenue-per-employee-set-to-decline/

World Oil - Funding for shale drillers dries up as lenders leave the sector

NEW YORK (Bloomberg) --One of the key sources of funding for American shale is evaporating, just as the the sector needs it more than ever.

Banks lending against the oil and natural gas reserves of hundreds of independent U.S. drilling companies have pulled back from the sector at an unprecedented rate this year after energy prices slumped. There’s every indication they’re not done: Many in the industry expect further reductions to credit facilities in the fall, with higher costs and more stringent protections for lenders.

All that comes at a time that could scarcely be more challenging for shale. Weakened by poor returns to shareholders, it was getting shut out of the bond and equity markets even before the Covid-19 pandemic decimated global demand. With crude prices staging a limited recovery in the last two months to around $40 a barrel, shale operators face an uncertain future, one where they must to drill to generate cash flow while facing a higher cost of capital.

“As long as oil prices stay at $40 or less and gas stays at $2 or less, I think banks are going to continue to be very cautious and continue to pull back,” said Spencer Cutter, an analyst at Bloomberg Intelligence. “It’ll be the end of shale if oil stays below $40.”

https://www.worldoil.com//news/2020/7/23/funding-for-shale-drillers-dries-up-as-lenders-leave-the-sector?id=31307113

World Oil - Shale drillers plan for maintenance, not growth, as oil prices stall

HOUSTON (Bloomberg) --America’s most prolific shale drillers are accepting a fate once anathema to an industry obsessed with growth: Drilling just to ward off production drops.

The pandemic and subsequent plunge in crude prices has forced U.S. crude explorers to scrap plans to expand supplies amid investor skepticism toward the shale business model. For some of the biggest names in the Permian, that’s meant vowing restraint as long as oil lingers at levels too poor to justify a new boom.

The pledges also come on the heels of the worst crude crash in the 161-year history of the petroleum industry. Explorers are disclosing just how deeply their balance sheets were wounded by a quarter that included the heretofore unheard-of phenomenon of negative prices.

“These guys have all just had a near-death experience,” said Raoul LeBlanc, an analyst at IHS Markit Ltd. “It will take some time to get themselves back in a a better position.”

https://www.worldoil.com//news/2020/8/5/shale-drillers-plan-for-maintenance-not-growth-as-oil-prices-stall?id=31307113

BTU Analytics - COVID-19 Puts Wave 2 LNG in Jeopardy

Just under a year ago, BTU Analytics released Getting to the Gulf, an in-depth analysis of Wave 2 LNG facilities and the potential infrastructure bottlenecks that could hinder growth. At the time, US LNG demand had been on a steady upward trend with feedgas deliveries growing over 90% in 2019. However, the COVID-19 pandemic has disproportionately hit US LNG exports and as a result significantly altered the trajectory of US LNG forecasts. In today’s Energy Market Insight, BTU Analytics revisits Wave 2 LNG facilities’ progress, or lack thereof, that could put Wave 2 LNG in jeopardy.

https://btuanalytics.com/natural-gas-pricing/covid-19-puts-wave-2-lng-in-jeopardy/

Baker Hughes US Land Weekly Rig Count - August 7 2020

After 1 week of stabilized rig count, the US Land rig count returned to a decline, losing 4 rigs week on week. The Baker Hughes Rig Count for US Land showed 235 active rigs. The Permian lost 2 rigs, the Eagle Ford lost 1 rig and Mississippi drop it's only rig.

We should expect the rig count to bump along the bottom for the next several weeks. As quarterly results continue to be released, we should have a much better idea about activity for the remainder of 2020. The one metric I will be watching closely is the amount of CapEx spent in the first half of 2020 and the amount remaining for the second half of 2020. 

Figure 1: Baker Hughes US Land Weekly Rig Count - August 7 2020
(Source: Baker Hughes)

Table 1: Baker Hughes Weekly Rig Count - August 7 2020
(Source: Baker Hughes) 

Table 2: Baker Hughes US Land Weekly Rig Count - August 7 2020
(Source: Baker Hughes)

Mike Shellman - The Responsibility of Influence

I do not pretest to be anybody other than a dumbass roughneck who has drilled and completed LOTS of wells with his own money. I don't have a college degree nor initials to put after my name, but after 45 years I do understand well economics and how to manage oil and gas production.

My counterpart's credentials are those of great influence across America, as a keynote speaker, a frequent podcast participant, a guest on cable net news networks and someone who when speaks, people listen...including the President of the United States, I'm sure. I respect this gentleman's contributions to my industry and the fact that he made an absolute killing when he sold his data sell company at the height of the shale oil phenomena.

So, how many HZ shale oil wells actually pay out in a year and get to 140% ROI at $40 WTI in America?

https://www.oilystuffblog.com/single-post/2020/08/01/The-Responsiblity-of-Influence