BH Rigs Aug 3: Really Shocking

  • A shockingly bad week for rig counts, notwithstanding that is was expected
  • Total oil rigs fell, -2 to 859
  • Horizontal oil rigs collapsed, -6 to 756
  • The 4 wma change for horizontal oil rigs came in at -3.75 / week, the worst performance since last November.  The model says this number continues to deteriorate, with declines through Labor Day.
  • The Cana Woodford was pounded, down 3.  Horizontal rigs were not much changed by play otherwise.
  • The number of frac spreads fell by 5, now 25 (-5.3%) below their June peak.  Problems in the shale patch extend to fracking, and not just drilling.
  • The apparent breakeven to add horizontal oil rigs came in around $75 / barrel WTI (front month, 4 wma basis)
  • Vertical oil rigs are at their highest level since last November – is that a precursor to rising horizontal rigs a few weeks later?
  • There is a discrepancy between Baker Hughes and Drilling Info in terms of horizontal rig count trends. 
  • Last week, we said the Williston Fund (ICPAX), which we track as a metric of equities to oil prices, looked undervalued. It is up 3% since then.  We expect oil-related equities to run hard until the next sell-off in the market, probably in late October.
  • Q3 GDP – Another hot quarter coming up?
    • NY Fed: 2.6%; Atlanta Fed: 4.4%

Baker Hughes Rig Count Aug. 3, 2018