Rigs and Spreads July 21: Ugly

  • Rig counts

    • Total oil rig counts declined, -3 to 534

    • Horizontal oil rig counts fell, -4 to 483

    • The Permian horizontal oil rig count was down, -3.  The Permian has been losing rigs and a fair pace for the last two months.

  • The horizontal oil rig count fell at a pace of -3.25 / week on a 4 wma basis.

    • This number has been negative for 32 of the last 33 weeks

  • Frac spreads rose, +11 to 274.  This is not sustainable.

    • DUC inventory has fallen below 15 weeks for the first time, 14.7 weeks today

    • In order to hold DUC counts constant, horizontal rigs would have to rise by 68 or frac spreads would have to fall 34.

  • The EIA issued the July DPR this week.  Highlights:

    • Crude and condensate production from key shale plays rose in June to 9.23 mbpd, up 36 kbpd from May

    • Permian production was up 11 kbpd in June.  Permian production growth has averaged 12 kbpd / month over the last three months

    • The Permian is really slowing down; growth is being sustained by the Bakken, with support from the other secondary plays

    • Compared to last year, total shale oil production is up 0.7 mbpd; the Permian is up 0.5 mbpd

  • Production is being sustained in part by the cannibalization of the DUC inventory