Baker Hughes US Land Weekly Rig Report - Jan 15 2020

This week the Baker Hughes US Land Rig Count increased 13 rigs to finish at 354 active rigs. The Permian added 10 rigs, the DJ Basin added 2 rigs and the ArkLaTex and Eagle Ford each added 1 rig.

Oil prices continue to climb and WTI was over $50 for the week for the first time since February. While the increasing oil prices are a good sign, there are plenty of reasons to remain cautious. COVID cases continue to increase, with new lockdowns in Europe and there is still plenty of oil supply if demand drops. Most projections showing demand returning to greater than 100 BOPD sometime in 2022 as the COVID vaccination reaches the majority of the population

Figure 1: Baker Hughes US Land Rig Count - Jan 15 2020
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Rig Count - Jan 15 2020
(Source: Baker Hughes)

Baker Hughes US Land Weekly Rig Report - Jan 8 2021

This week, the Baker Hughes US Land Rig Count rose 9 rigs to 341 active rigs. The Permian added 4 rigs, the Northeast added 2 rigs and the MidCon and West Coast each added 1 rig. Rig count continues to rise as oil prices remain in the $45 to $50 range.

In the last week, OPEC+ has come to an agreement to maintain production levels. US operators have echoed these statements, with many of the public operators discussing maintaining current production levels rather than trying to grow production. We will be able to determine the commitment of US Operators to maintaining production levels by monitoring US rig count. It's estimated that US Land rig count would need to approach 600 rigs in order to maintain current production levels. If we see a large increase of rigs past this level, US production will start to grow again. Hopefully we can avoid the mistakes of the past while rebuilding the US Oil and Gas Industry

Figure 1: Baker Hughes US Land Rig Count - Jan 8 2021
(Source: Baker Hughes)

Table 1: Baker Hughes US Land Rig Count by State - Jan 8 2021
(Source: Baker Hughes)

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)