Rigs, Spreads and EIA DPR April 19: Rigs falling, production easing back

  • Oil rigs fell, -8 to 825

  • Horizontal oil rigs resumed their fall, -3 to 724

  • The 4 wma for horizontal oil rig changes rose to -3.0 / week. This metric should improve from here on out.

  • There was little action by play, but ‘Other US’ continues to roll off, down two horizontal oil rigs this week.

  • Frac spreads eased back again this week, -8 to 470. The frac spread ratio stands at 64.9%, well above its normalized value of 62.0%

  • The EIA published the April Drilling and Productivity Report this week. Highlights:

    • US shale production for February was revised down more than 200 kbpd compared to the previous report.

    • Revisions were negative across the board, with both the Bakken and the Permian revised down about 80,000 bpd

    • March production was estimated at 8.12 mbpd, 120 kbpd below last month’s estimate for February

    • Total production in the current report was estimated up by 87 kbpd for March over February

    • Year on year, production growth declined to 1.37 mbpd, compared 1.72 mbpd last month

    • On a trailing 3 month annualized basis, shale oil production is increasing at a 0.27 mbpd / year pace (v 1.15 mbpd / year last month), of which 0.16 mbpd (0.68 mbpd / year last month) is from the Permian alone.

    • The latest DPR report shows wells drilled continues to decline, from a peak of around 335 / week in November, falling below 300 in April

    • The number of wells completed has been increasing, and is predicted to continue to do so, from around 280 last fall to over 300 in April.

    • Completions should exceed wells drilled in April, an uncommon event in recent history

    • DUCs looks to peak in April

  • On the face of it, shale production may be beginning to turn. If this trend holds, oil prices could move very substantially higher.

  • If there is a recession in 2020, the graph below will be to blame

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