Rigs and Spreads Nov. 17: Rig and spread gains within overall steadiness

The breakeven to add US horizontal oil rigs now exceeds $90 / barrel WTI. That is, at $90 WTI, we can expect US operators to be cutting rigs. That is incredible by the standards of the last decade, when analysts like Goldman Sachs spoke of $30-40 breakevens.

  • Rig counts are essentially holding steady over the last five weeks

    • Total oil rig counts: +6 to 500

    • Horizontal oil rig counts: +6 to 452

    • The Permian horizontal oil rig count: +5, the biggest gain since February

    • The Canadian horizontal oil rig count eased back this week, -4 to 119, now 10 below this week last year

  • The US horizontal oil rig count is rising at a pace of +0.75 / week on a 4 wma basis.

    • This number is positive for the third time in the last 50 weeks

  • Frac spreads rose, +8 to 276  

    • DUC inventory, as measured in days of turnover, fell to a new low of 12.8 weeks

    • Since July 2020, 16% of completions have come from cannibalization of DUC inventory

  • The Brent Spread (Brent – WTI) remains open, suggesting US shale oil production is exceeding expectations.

    • This is also true if we consider US production including unaccounted-for barrels, which continues to suggest production growth in the 600-800 kbpd / year pace

Rigs and Spreads Nov 17.pdf