Rigs and Spreads Oct. 27: A Clear Trough


A clear trough has emerged, and rig counts are rising, if slowly

  • Rig counts

    • Total oil rig counts: +2 to 504

    • Horizontal oil rig counts: +2 to 451

    • The Permian horizontal oil rig count: +2

    • The Canadian horizontal oil rig count saw progress this week, +1 to 119, but still 19 below this week last year

  • The US horizontal oil rig count is rising at a pace of +1.0 / week on a 4 wma basis.

    • This number is positive for the first time in 48 weeks

  • Frac spreads rose, +6 to 275  

    • Even more than last week, there is a stark mismatch between rigs and spreads now, with DUC inventory, as measured in days of turnovers, falling to a nine-year low of 13.9 weeks

    • The rig/spread relationship is even more unstable than I noted last week.  To attain stability in the DUC count, rigs must either rise by 84 or spreads must fall by 43.  

  • If the breakeven to add rigs of $83 holds, then we should see appreciable rig additions in the coming weeks.

    • On the other hand, if rig counts fail to show material signs of life (cc +4 hz rigs per week), then we may be seeing the last hurrah of the US shale sector, with operators running down DUC inventories like an alcoholic taking a last drink before entering rehab.