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Oil rigs at highest level in a year
The past week was the first time the oil rig count cracked the 400-mark since mid-April 2020, when upstream operators were shedding rigs after a steep oil price drop in early March as the pandemic hit the market. The nationwide total rig count reached 838 in the first week of March, but plummeted 67% in the following four months before starting to slowly inch back up.
So far, the US fleet has regained 249 rigs since the fall from March 2000, less than half the 559 it lost.
Investment bank Goldman Sachs expects the total US oil and gas rig count to expand by an incremental 65-85 rigs by year-end 2021, with the “most upside” in the Permian at an incremental 35-45 rigs from the current count.
The investment bank also sees five to 10 incremental rigs in the Eagle Ford Shale by year-end 2021, three to five incremental rigs in the DJ-Niobrara, two to three incremental rigs in the Haynesville Shale, and one to two incremental rigs in the SCOOP/STACK.
One interesting anticipated Permian rig reduction, according to Evercore ISI analyst James West, will be the planned cutback in drilling for DoublePoint Energy, a small privately held operator being acquired by giant public Pioneer Natural Resources.
DoublePoint was in a substantial (30%/year) production growth mode, but Pioneer plans to cut the small operator’s seven rigs to five by year’s end as part of its own disciplined growth mode of 5%/year. The transaction should close in mid-to-late Q2.
“It will be interesting to see how a public company espousing capital discipline absorbs a private [player] operating under a different set of strategic objectives,” West said in an April 5 investor note.
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